by Mike Fickes

Hamid R. Moghadam, chairman and chief executive officer of the $4.4 billion AMB Property Corporation in San Francisco, has earned a reputation among financial analysts as a straight shooter. When reporting AMB's first quarter 2001 operating results, for example, Moghadam suggested that analysts use figures incorporating a special charge of $4.7 million, or five-cents a share, to calculate earnings. Recently, he spoke to Portfolio about the straightforward business philosophy and highly focused strategy that has built AMB into one of the nation's strongest industrial REITs.

Portfolio: A recent Wall Street Journal article praised AMB for its straight talk about earnings. Would you comment on that?

Moghadam: Trust is important to us. We treat shareholders and financial analysts with respect by disclosing our performance clearly for them. It's silly to try to hide the ball. At the end of the day, people are going to get to the bottom line.

More importantly, it takes a long time to build a brand of trust and integrity and only an instant to destroy it. I think that trust is the most important currency in business. Money is a commodity, but your word, your bond and your brand are differentiating qualities.

Portfolio: Most real estate companies have gone to the public markets in the hopes of raising capital to fuel growth. What were your thoughts in taking AMB public in 1997?

Moghadam: We didn't go public for conventional reasons. In 1997, we had about $1 billion of capital available to invest, and the company was only about 25 percent leveraged. We didn't need capital, but we had three good reasons for going public.

First, keep in mind that while we are a public REIT, we have continued co-investing with pension funds, foundations and endowments. In light of this, one reason we went public lies in the flexibility of a public-private business model. Now, we believe we can execute our business plan better by accessing both the public and private markets.

Second, a public company serves our customers better. A private investment advisor manages discrete portfolios with separate ownerships, making it impossible to move tenants around among different ownerships. As a public company, we've integrated those ownerships. This allows our customers to tap into our entire array of assets.

Finally, going public provided liquidity for retiring partners as well as a way for younger managers to participate in ownership.

Portfolio: Many REITs focus on industrial properties, but AMB specializes in a particular kind of industrial property. Why?

Moghadam: We have a unique strategy. We focus on high throughput distribution properties or properties built primarily for speed as opposed to storage. Geographically, we focus on large metropolitan areas and infill sub-markets in these areas. Other REITs own high throughput distribution properties, but none focuses solely on this segment.

Portfolio: AMB has made a number of investments in Internet- related companies. What is the status of those investments?

Moghadam: During the first quarter of this year, we wrote off 93 percent of our investment in Webvan, totaling $4.7 million or five cents-a-share. We had a very good second quarter in terms of real estate operating performance. Our core results were excellent. But we also wrote off the remainder of our investment in Webvan and in several other technology companies. This write-off produced a charge of $16.1 million or 18 cents-a-share. These charges fully account for our technology investments.

Portfolio: Grubb & Ellis recently reported that the national industrial vacancy rate increased by a record 0.6 percent during the first quarter of 2001. How has your strategy functioned during the current slowdown?

Moghadam: It's no secret that all kinds of properties are experiencing higher vacancy rates in 2001, thanks to the slowing economy. Of all the different property types, industrial is in the best shape. We just released AMB's second quarter earnings, which showed that our vacancy rate increased only 0.1 percent. So we've fared well, although we're certainly not insulated from what is going on in the larger real estate world.

Portfolio: Speaking of insulation, what do you do to get away from the real estate world and relax?

Moghadam: I recently returned from Europe, where I spent three weeks on vacation. In terms of entertainment, many of my choices are for the pure enjoyment. I like the "Indiana Jones" movies, the "Star Wars" movies, and most of the "Star Trek" movies—a lot of sci-fi. And I like Formula One racing. I also have a number of cultural and charitable interests.

Portfolio: How about books?

Moghadam: I like Tom Clancy's books, but my favorite book is Atlas Shrugged.

Portfolio: You're an Ayn Rand fan?

Moghadam: Isn't everybody? (Laughter)

Portfolio: You mentioned cultural and charitable interests.

Moghadam: Well, I'm originally from Iran, and I have a taste for Asian art and Persian rugs. I'm also very interested in children's museums. I'm active with the Bay Area Discovery Museum. In fact, I'm on the board. And my wife is on the board of the Asian Arts Museum in San Francisco. I'm also on the board of the Stanford Management Company, which manages the Stanford endowment. I went to business school at Stanford, so that's part of giving back. I did my undergraduate work at MIT and have been pretty involved there over the years, although the distance makes it difficult to be as committed there.