UPDATE 3-AMB third-quarter FFO beats Wall St forecast

* Raises forecast range

* Sets 2010 outlook

* Shares rise 4.4 pct (Adds 2010 outlook, updates stock price)

NEW YORK, Oct 21 (Reuters) - AMB Property Corp AMB.N, which owns, develops and manages warehouses and distribution centers around the world, reported higher-than-expected quarterly funds from operations (FFO) primarily on lower expenses, and its shares rose more than 4 percent.

AMB said on Wednesday that third-quarter FFO rose to $106.5 million, or 71 cents per share, from $71.1 million, or 69 cents per share, a year earlier. The company's shares outstanding increased 50 percent from a year ago.

Excluding development gains, the company reported FFO of 35 cents a share, compared with analysts' forecast of 33 cents a share, according to Thomson Reuters I/B/E/S.

FFO, a gauge of the performance of a real estate investment trust, removes the profit-reducing effect of depreciation, a noncash accounting item.

AMB depends on global trade to drive demand for its buildings, which store goods bound for markets around the world. The company and its chief competitor, ProLogis (PLD.N), have been hit hard by the economic downturn and the credit crisis, which have drained the demand for its buildings, especially ones constructed without a tenant. Both companies have curtailed development, limiting their activity to projects they previously committed to building and those constructed for other buyers.

The company's average occupancy during the third quarter was 90.4 percent, down from 95.3 percent in the year-earlier quarter.

For property owned at least one year, net operating income (NOI) fell 7 percent, excluding the effects of lease termination fees. The decline was driven primarily by lower average occupancies and lower market rents.

NOI reflects cash flow that the properties generate.

Rental revenue was nearly flat compared with a year earlier, but the San Francisco-based company reduced its general and administrative expenses by 21 percent and recognized $60 million from building sales.

During the quarter, the company continued to strengthen its balance sheet, completing $122 million of debt repayments, repurchases and extensions. It had $1.1 billion available on its lines of credit and $201 million of cash.

Since the third quarter's end, AMB refinanced its $325 million senior unsecured term loan, which was set to mature in September 2010, and expanded it to a a $345 million facility, maturing October 2012.

"The improvements and progress we have made in our business, over the last nine months, have allowed us to successfully navigate the downturn," Hamid Moghadam, chairman and chief executive, said in a statement. "We are now working on a number of initiatives to take advantage of opportunities as the global economy rebounds."

At the end of the quarter, its development pipeline, including unconsolidated joint ventures, stood at 6.8 million square feet (632,000 square meters) scheduled for delivery through 2010, with an estimated total investment cost of $547 million.

The company's remaining share of cash needed to complete the pipeline, was $54 million.

AMB narrowed and raised its forecast for 2009 FFO to a range of $1.45 to $1.46 per share from a previously narrowed $1.41 to $1.45.

For 2010, the company sees average occupancy of between 90 percent and 92 percent and same-store NOI before lease termination fees and without the effect of foreign currency exchange to be flat to down 2 percent. Finally it sees 2010 FFO in the range $1.29 to $1.36 per share.

AMB shares were up 4.4 percent at $23.39 in afternoon trade on the New York Stock Exchange.

(Reporting by Ilaina Jonas, editing by Dave Zimmerman and Steve Orlofsky)