FFO of $0.47 per Share in Q4 and $1.89 per
Share in 2014;Increased 5.0 Percent Year-over-Year
Consolidated Operating Occupancy Increased
to 95.4 Percent in Q4;Up 190 Basis Points over Q3 and 210
Basis Points Year-over-Year
Same-Store NOI Growth of 7.8 Percent on a
Cash Basis and 6.2 Percent on a GAAP Basis in Q4
Signed 16.5 Million Square Feet of Leases in
2014 – Highest Leasing Year in Company’s History
Rent Growth of 10.4 Percent on a GAAP Basis
and 3.3 Percent on a Cash Basis in Q4;12.0 Percent on a GAAP
Basis and 4.5 Percent on a Cash Basis for the Full Year
Since September 30, Acquired 1.9 Million
Square Feet for $128.7 Million;Sold 4.4 Million Square Feet
for $166.2 Million
DCT Industrial Trust® (NYSE: DCT), a leading industrial
real estate company, today announced financial results for the
three months and year ending December 31, 2014.1
“DCT had an outstanding year. We performed very well
operationally with continued strong rent spreads and same-store NOI
growth, occupancy increasing 190 basis points in the fourth quarter
and record-breaking leasing activity,” said Phil Hawkins, Chief
Executive Officer of DCT Industrial. “We also continue to be
successful in creating value through our portfolio repositioning
efforts and by leveraging our value-add and development
capabilities.”
Funds from operations, as adjusted, attributable to common
stockholders and unitholders (“FFO”) for Q4 2014 totaled $42.8
million, or $0.47 per diluted share, compared with $38.0 million,
or $0.45 per diluted share, for Q4 2013, an increase of 4.4 percent
per diluted share. These results exclude $1.0 million and $1.9
million of acquisition costs for the quarters ending December 31,
2014 and 2013, respectively.
For the year ending December 31, 2014, FFO totaled $167.0
million, or $1.89 per diluted share, compared with $144.2 million,
or $1.80 per diluted share, for the year ending December 31, 2013,
an increase of 5.0 percent per diluted share. These results exclude
$3.0 million and $3.6 million of acquisition costs for the years
ending December 31, 2014 and 2013, respectively.
Net income attributable to common stockholders for Q4 2014 was
$29.6 million, or $0.34 per diluted share, compared with net income
attributable to common stockholders of $13.9 million, or $0.17 per
diluted share, reported for Q4 2013. Net income attributable to
common stockholders for the year ending December 31, 2014 was $49.2
million, or $0.58 per diluted share, compared with a net income of
$15.9 million, or $0.20 per diluted share, for the year ending
December 31, 2013.
1 All share and per share amounts in this release have been
restated for the effects of DCT Industrial’s 1-for-4 reverse stock
split in November 2014.
Property Results and Leasing
Activity
As of December 31, 2014, DCT Industrial owned 393 consolidated
operating properties, totaling 62.0 million square feet, with
occupancy of 95.4 percent, an increase of 190 basis points over Q3
2014 and 210 basis points over Q4 2013. Approximately 0.8 million
square feet, or 1.2 percent of DCT Industrial’s total consolidated
portfolio was leased but not occupied at December 31, 2014.
In Q4 2014, the Company signed leases totaling 5.5 million
square feet with rental rates increasing 10.4 percent on a GAAP
basis and 3.3 percent on a cash basis, compared to the
corresponding expiring leases. For the full-year, the Company
signed leases totaling 16.5 million square feet with rental rates
increasing 12.0 percent on a GAAP basis and 4.5 percent on a cash
basis. The Company’s tenant retention rate was 89.0 percent in Q4
2014 and 81.3 percent for the year ending December 31, 2014.
In Q4 2014, same-store NOI, excluding revenue from lease
terminations, increased 7.8 percent on a cash basis and 6.2 percent
on a GAAP basis, when compared to Q4 2013. Same-store occupancy
averaged 95.2 percent in Q4 2014, an increase of 190 basis points
over Q4 2013. For the year ending December 31, 2014, same-store
NOI, excluding revenue from lease terminations, increased 3.8
percent on a cash basis and 3.9 percent on a GAAP basis, when
compared to the year ending December 31, 2013. Same-store occupancy
averaged 93.6 percent for the full-year 2014, an increase of 90
basis points over the full-year 2013.
Investment Activity
Acquisitions
Since September 30, 2014, DCT Industrial acquired 17 buildings
for $128.7 million. Totaling 1.9 million square feet, these
buildings were 78.1 percent occupied at the time of closing. The
Company expects a year-one weighted-average cash yield of 4.7
percent and anticipates a weighted-average stabilized cash yield of
6.6 percent on the acquired assets.
The table below summarizes acquisitions since September 30,
2014:
Market Submarket Square Feet
Occupancy
at Closing
Closed
Anticipated Yield1 New Jersey Exit
10/Route 2872 63,000 0.0 %
Oct-14 5.2 % Houston, TX Northwest
39,000 100.0 % Oct-14 6.8 % Phoenix, AZ (5 buildings) Tempe/Airport
355,000 97.6 % Oct-14 6.7 % Atlanta, GA I-75 Northwest 151,000
100.0 % Oct-14 6.5 % Southern California South Bay 102,000 100.0 %
Nov-14 6.0 % Dallas, TX DFW Airport2 63,000 100.0
%
3
Dec-14 7.3 % Baltimore/Washington D.C. Baltimore/Washington
Corridor 120,000 100.0 % Dec-14 7.0 % Miami, FL Miami International
Airport 75,000 67.0 % Dec-14 6.9 % Seattle, WA (2 buildings)
Northend 149,000 100.0 % Dec-14 6.3 % Chicago, IL I-88 Corridor2
320,000 0.0 % Dec-14 6.4 % Dallas, TX DFW Airport 67,000 100.0 %
Dec-14 6.5 % Atlanta, GA I-85 Northeast
398,000 100.0
%
3
Jan-15 7.3 %
Total/Weighted Average 1,902,000 78.1 % 6.6 %
For the year ending December 31, 2014, the Company acquired 36
buildings, totaling 5.6 million square feet for $363.1 million. The
Company expects a year-one weighted-average cash yield of 4.2
percent and a weighted-average projected stabilized cash yield of
6.2 percent.
1 Anticipated yield represents year-one cash yield for
stabilized acquisitions and projected stabilized cash yield for
value-add acquisitions.2 See Redevelopment section.3 Acquired with
known year-one move-out.
Redevelopment
The acquisition table above includes three redevelopment
properties:
- The 63,000 square foot building located
in the Exit 10/Route 287 submarket of New Jersey, was vacant at the
time of acquisition. The Company executed a full-building lease
which will commence after renovations are complete in Q1 2015.
- The 63,000 square foot building located
in the DFW Airport submarket of Dallas, was 100 percent leased at
the time of acquisition with the expectation that the current
tenant was vacating. The now vacant building is actively being
marketed during renovations which are scheduled to be complete in
Q2 2015.
- The 320,000 square foot building
located in the I-88 Corridor submarket of Chicago, was vacant at
the time of acquisition. The building is being actively marketed
during renovations which are scheduled to be complete in Q2
2015.
Additionally, DCT Industrial executed two leases for current
redevelopment projects. In December, a full-building lease was
signed for an 82,000 square foot redevelopment located in the
Inland Empire West submarket of Southern California. The project is
slated for completion in Q1 2015. In November, a full-building
lease was signed for a 228,000 square foot redevelopment located in
the O’Hare submarket of Chicago. The project is slated for
completion in Q1 2015.
Development
Development highlights since September 30, 2014:
- Pre-leased three spaces totaling
172,000 square feet at DCT Northwest Crossroads Logistics Centre I,
which completes the lease-up of the 362,000 square foot building
located in the Northwest submarket of Houston. The project is
slated for completion in Q1 2015.
- Pre-leased all of DCT White River
Corporate Center Phase II South, a 63,000 square foot building
located in the South Kent Valley submarket of Seattle. The project
is slated for completion in Q1 2015.
- Pre-leased 36,000 square feet at DCT
Fife 45 South, a 64,000 square foot building located in the
Tacoma/Fife submarket of Seattle. The lease brings the building to
57 percent pre-leased. The project is slated for completion in Q1
2015.
- Commenced construction of DCT O’Hare
Logistics Center, a 112,000 square foot building located in the
O’Hare submarket of Chicago. The project is slated for completion
in Q3 2015.
- Purchased 18.1 acres in the Northwest
submarket of Dallas for the development of DCT Waters Ridge, a
347,000 square foot building.
- In January, executed a lease and
commenced construction on the 55,000 square foot expansion of 6400
Hollister Road, a 222,000 square foot building located in the
Northwest submarket of Houston. The building is 100 percent leased
with the expansion slated for completion in Q4 2015.
Dispositions
Since September 30, 2014, DCT Industrial sold 21 buildings
totaling 4.4 million square feet. This includes 3.5 million square
feet in Columbus, marking the Company’s exit from the market, and a
503,000 square foot unconsolidated joint venture property located
in Savannah, which was the Company’s only asset there. These
transactions generated total gross proceeds of $166.2 million1 and
have an expected year-one weighted-average cash yield of 6.4
percent.
The table below summarizes the dispositions since September 30,
2014:
Market Submarket Square Feet
Occupancy Closed Columbus, OH
(12 buildings) 3,480,000 97.7 % Oct-14 Pennsylvania2 Lehigh Valley
112,000 0.0 % Oct-14 Savannah, GA3 Liberty County 503,000 100.0 %
Dec-14 Houston, TX (7 buildings) Southwest
354,000 95.1 %
Dec-14 Total/Weighted Average 4,449,000 95.3 %
For the year ending December 31, 2014, the Company sold 52
buildings, totaling 10.5 million square feet and 29.2 acres. These
transactions generated total gross proceeds of $319.2 million1 and
have an expected year-one weighted-average cash yield of 6.6
percent.
In January, DCT Industrial entered into a contract to sell six
of its eight assets in Memphis totaling 2.3 million square feet for
a sale price of $86.7 million. The transaction is expected to close
in Q1 2015 and is subject to certain closing conditions.
1 Includes DCT Industrial’s proportionate share of gross
proceeds for property sold by an unconsolidated joint venture.2
Sold to a user.3 Unconsolidated property.
Capital Markets
Since September 30, 2014, DCT Industrial raised $23.0 million in
net proceeds from the sale of common stock through its “at the
market” equity offering. The Company issued approximately 0.8
million shares at an average price of $30.97 per share. The net
proceeds were used for acquisitions, development activities and for
general corporate purposes.
In November, DCT Industrial issued 3.4 million shares in a
public offering of common stock raising net proceeds of
approximately $112.5 million after expenses. The Company used the
net proceeds received from this offering for acquisitions,
development activities, repayment of amounts outstanding under its
senior unsecured revolving credit facility and for general
corporate purposes.
Also in November, DCT Industrial completed a 1-for-4 reverse
stock split of its common stock. As a result of the reverse stock
split, the numbers of outstanding shares of common stock of the
Company as of the date of the reverse stock split was reduced from
approximately 338.1 million to approximately 84.5 million. As
previously noted, the above numbers are post-reverse stock
split.
Dividend
DCT Industrial’s Board of Directors has declared a $0.28 per
share quarterly cash dividend, payable on April 15, 2015 to
stockholders of record as of April 3, 2015.
Guidance
The Company’s guidance for 2015 FFO is between $1.86 and $1.98
per diluted share. Additionally, net income attributable to common
stockholders is expected to be between $0.24 and $0.38 per diluted
share.
DCT Industrial’s guidance for 2015 includes the following
assumptions:
- Same-store net operating income will
increase between 5.0 percent and 6.5 percent on a cash basis and
between 3.5 percent and 5.0 percent on a GAAP basis
- Average consolidated operating
occupancy between 94.5 percent and 95.5 percent
- Acquisitions of between $200 million
and $300 million including stabilized and value-add
- Development starts of between $100
million and $200 million
- Dispositions of non-strategic assets of
between $250 million and $350 million
The Company’s FFO guidance excludes acquisition costs.
Conference Call
Information
DCT Industrial will host a conference call to discuss Q4 and
full-year 2014 results on Friday, February 6, 2015 at 11:00 a.m.
Eastern Time. Stockholders and interested parties may listen to a
live broadcast of the conference call by dialing (877) 506-6112 or
(412) 902-6686. A telephone replay will be available through
Friday, February 20, 2015 and can be accessed by dialing (877)
344-7529 or (412) 317-0088 and entering the passcode 10057902. A
live webcast of the conference call will be available in the
Investors section of the DCT Industrial website at
www.dctindustrial.com. A webcast replay will also be available
shortly following the call until February 6, 2016.
Supplemental information is available in the Investors section
of the Company’s website at www.dctindustrial.com or by e-mail
request at investorrelations@dctindustrial.com. Interested parties
may also obtain supplemental information from the SEC’s website at
www.sec.gov.
About DCT Industrial
Trust®
DCT Industrial is a leading industrial real estate company
specializing in the acquisition, development, leasing and
management of bulk distribution and light industrial properties in
high-volume distribution markets in the U.S. As of December 31,
2014, the Company owned interests in approximately 72.3 million
square feet of properties leased to approximately 900 customers.
DCT maintains a Baa2 rating from Moody’s Investors Service and a
BBB- from Standard & Poor’s Rating Services. Additional
information is available at www.dctindustrial.com.
Click here to subscribe to Mobile Alerts for DCT Industrial.
DCT INDUSTRIAL TRUST INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share
information)
December 31, December 31, 2014 2013
ASSETS (unaudited) Land $ 950,963 $ 883,804 Buildings and
improvements 2,783,828 2,615,879 Intangible lease assets 86,515
82,758 Construction in progress 139,069 88,610
Total investment in properties 3,960,375 3,671,051 Less
accumulated depreciation and amortization (703,840 )
(654,097 )
Net investment in properties 3,256,535 3,016,954
Investments in and advances to unconsolidated joint ventures
94,728 124,923
Net investment in real estate
3,351,263 3,141,877 Cash and cash equivalents 19,631 32,226
Restricted cash 3,779 12,621 Deferred loan costs, net 8,026 10,251
Straight-line rent and other receivables,
net of allowance for doubtful accounts of $956 and
$2,178, respectively
54,183 46,247 Other assets, net 14,652 14,545 Assets held for sale
- 8,196
Total assets $ 3,451,534 $ 3,265,963
LIABILITIES AND EQUITY Liabilities: Accounts payable
and accrued expenses $ 83,543 $ 63,281 Distributions payable 25,973
23,792 Tenant prepaids and security deposits 30,539 28,542 Other
liabilities 14,078 10,122 Intangible lease liabilities, net 22,940
20,389 Line of credit 37,000 39,000 Senior unsecured notes
1,122,621 1,122,407 Mortgage notes 249,424 290,960 Liabilities
related to assets held for sale - 278
Total
liabilities 1,586,118 1,598,771 Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized,
none outstanding - - Shares-in-trust, $0.01 par value, 100,000,000
shares authorized, none outstanding - -
Common stock, $0.01 par value, 500,000,000
shares authorized 88,012,696 and 80,066,487 shares
issued and outstanding as of December 31, 2014
and December 31, 2013, respectively
880 801 Additional paid-in capital 2,762,431 2,514,426
Distributions in excess of earnings (986,289 ) (941,019 )
Accumulated other comprehensive loss (27,190 )
(30,402 )
Total stockholders’ equity 1,749,832 1,543,806
Noncontrolling interests 115,584 123,386
Total
equity 1,865,416 1,667,192
Total liabilities
and equity $ 3,451,534 $ 3,265,963
DCT INDUSTRIAL TRUST INC. AND
SUBSIDIARIES
Consolidated Statements of
Operations
(unaudited, in thousands, except per
share information)
Three Months Ended Year Ended December
31, December 31, 2014 2013
2014 2013 REVENUES:
Rental revenues $ 84,581 $ 76,475 $ 334,787 $ 286,218
Institutional capital management and other fees 345
648 1,739 2,787
Total
revenues 84,926 77,123
336,526 289,005
OPERATING
EXPENSES: Rental expenses 9,013 9,904 40,520 35,977 Real estate
taxes 13,594 10,830 53,790 44,048 Real estate related depreciation
and amortization 37,447 35,368 148,992 130,002 General and
administrative 8,020 8,187 29,079 28,010 Impairment losses - -
5,635 - Casualty and involuntary conversion gain (2 )
- (328 ) (296 )
Total
operating expenses 68,072 64,289
277,688 237,741
Operating income
16,854 12,834 58,838 51,264
OTHER INCOME (EXPENSE):
Development profit, net of taxes - - 2,016 268 Equity in earnings
of unconsolidated joint ventures, net 1,260 684 6,462 2,405 Gain on
business combination - - 1,000 - Gain on dispositions of real
estate interests 28,024 - 39,671 - Interest expense (14,920 )
(16,066 ) (63,236 ) (63,394 ) Interest and other income (expense)
(19 ) (37 ) 1,563 274 Income tax benefit (expense) and other taxes
(40 ) 305 217
(68 )
Income (loss) from continuing operations 31,159
(2,280 ) 46,531 (9,251 ) Discontinued operations: Operating income
and other expenses - 1,196 321 6,383
Gain on dispositions of real estate
interests from discontinued operations
141 16,036 5,396
20,340 Income from discontinued operations 141
17,232 5,717 26,723
Consolidated net income of DCT Industrial Trust Inc. 31,300
14,952 52,248 17,472 Net income attributable to noncontrolling
interests (1,663 ) (1,013 )
(3,084 ) (1,602 )
Net income attributable
to common stockholders 29,637
13,939 49,164 15,870
Distributed and undistributed earnings
allocated to participating securities
(170 ) (167 ) (677 )
(692 )
Adjusted net income attributable
to
common stockholders
$ 29,467 $ 13,772 $ 48,487 $ 15,178
EARNINGS PER COMMON SHARE - BASIC Income (loss) from
continuing operations $ 0.34 $ (0.03 ) $ 0.52 $ (0.13 ) Income from
discontinued operations 0.00 0.20
0.06 0.33 Net income attributable to
common stockholders $ 0.34 $ 0.17 $ 0.58 $
0.20
EARNINGS PER COMMON SHARE - DILUTED
Income (loss) from continuing operations $ 0.34 $ (0.03 ) $ 0.52 $
(0.13 ) Income from discontinued operations 0.00
0.20 0.06 0.33 Net income
attributable to common stockholders $ 0.34 $ 0.17 $
0.58 $ 0.20
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING: Basic 86,406 79,464 83,280 74,692 Diluted 86,728
79,464 83,572 74,692
Reconciliation of Net Income
Attributable to Common Stockholders to Funds from
Operations
(unaudited, in thousands, except per
share and unit data)
Three Months EndedDecember
31,
Year EndedDecember 31,
2014 2013 2014 2013
Reconciliation of net income
attributable to common stockholders to
FFO:
Net income attributable to common
stockholders $ 29,637 $ 13,939 $ 49,164 $ 15,870 Adjustments: Real
estate related depreciation and amortization 37,447 35,527 148,992
137,120 Equity in earnings of unconsolidated joint ventures, net
(1,260 ) (684 ) (6,462 ) (2,405 ) Equity in FFO of unconsolidated
joint ventures 2,814 2,622 10,804 10,152 Impairment losses on
depreciable real estate - - 5,767 13,279 Gain on business
combination - - (1,000 ) - Gain on dispositions of real estate
interests (28,165 ) (16,036 ) (45,199 ) (33,650 ) Gain on
dispositions of non-depreciable real estate - - 98 31
Noncontrolling interest in the above adjustments (620 ) (1,145 )
(6,300 ) (8,211 ) FFO attributable to unitholders
1,953 1,835 8,106 8,437
FFO attributable to common stockholders and unitholders(1)
41,806 36,058 163,970
140,623 Adjustments: Acquisition costs 961
1,930 3,011 3,578
FFO, as adjusted, attributable to common
stockholders and unitholders – basic and diluted
$ 42,767 $ 37,988 $ 166,981 $ 144,201
FFO per common share and unit — basic $ 0.46 $
0.43 $ 1.86 $ 1.76 FFO per common share and unit —
diluted $ 0.46 $ 0.43 $ 1.85 $ 1.75
FFO, as adjusted, per common share and unit — basic $
0.47 $ 0.45 $ 1.89 $ 1.80 FFO, as adjusted,
per common share and unit — diluted $ 0.47 $ 0.45 $
1.89 $ 1.80 FFO weighted average common shares
and units outstanding: Common shares for earnings per share - basic
86,406 79,464 83,280 74,692 Participating securities 621 628 605
616 Units 4,242 4,436
4,331 4,770
FFO weighted average common shares,
participating securities and units outstanding –
basic
91,269 84,528 88,216 80,078 Dilutive common stock equivalents
322 252 292
223
FFO weighted average common shares,
participating securities and units outstanding –
diluted
91,591 84,780 88,508
80,301
(1) Funds from Operations, FFO, as defined by the National
Association of Real Estate Investment Trusts (NAREIT).
Guidance
The Company is providing the following
guidance:
Range for the Full-Year 2015 Low
High Guidance: Earnings per common share -
diluted $ 0.24 $ 0.38 Real estate related depreciation and
amortization(1) 1.58 1.58 Acquisition costs 0.04 0.02
FFO, as adjusted, per common share and unit-diluted(2) $ 1.86 $
1.98 The above guidance reflects the impact of the previously
announced reverse stock split. (1) Includes pro rata share of real
estate depreciation and amortization from unconsolidated joint
ventures. (2) The Company’s FFO guidance excludes acquisition
costs.
The following table shows the
calculation of our Fixed Charge Coverage for the three and twelve
months ended
December 31, 2014 and 2013 (in
thousands):
Three Months EndedDecember
31,
Year EndedDecember 31,
2014 2013 2014 2013 Net
income attributable to common stockholders(1) $ 29,637 $
13,939 $ 49,164 $ 15,870 Interest expense
14,920 16,066 63,236 63,394
Proportionate share of interest expense
from unconsolidated joint ventures
354 400 1,401 1,657 Real estate related depreciation and
amortization 37,447 35,527 148,992 137,120
Proportionate share of real estate related
depreciation and amortization from unconsolidated joint
ventures
1,378 1,484 5,533 5,924 Income tax (benefit) expense and other
taxes 40 (333 ) (185 ) 57 Stock-based compensation 1,367 1,098
4,777 4,004 Noncontrolling interests 1,663 1,013 3,084 1,602
Non-FFO gain on business combination - - (1,000 ) - Non-FFO gain on
dispositions of real estate interests (28,165 ) (16,036 ) (45,101 )
(33,619 ) Impairment losses - -
5,767 13,279 Adjusted EBITDA $ 58,641 $
53,158 $ 235,668 $ 209,288 CALCULATION
OF FIXED CHARGES Interest expense $ 14,920 $ 16,066 $ 63,236 $
63,394 Capitalized interest 2,979 2,241 9,098 8,298 Amortization of
loan costs and debt premium/discount (94 ) (403 ) (477 ) (558 )
Other noncash interest expense (1,027 ) (1,000 ) (4,105 ) (3,999 )
Proportionate share of interest expense
from unconsolidated joint ventures
354 400 1,401
1,657 Total fixed charges $ 17,132 $ 17,304 $
69,153 $ 68,792 Fixed charge coverage
3.4 3.1 3.4 3.0
(1) Includes amounts related to discontinued operations, when
applicable.
The following table is a reconciliation
of our reported income (loss) from continuing operations to our net
operatingincome for the three and twelve months ended
December 31, 2014 and 2013 (in thousands):
Three Months EndedDecember
31,
Year EndedDecember 31,
2014 2013 2014 2013
Reconciliation of income (loss) from continuing operations to
NOI: Income (loss) from continuing
operations $ 31,159 $ (2,280 ) $ 46,531 $ (9,251 ) Income tax
(benefit) expense and other taxes 40 (305 ) (217 ) 68 Interest and
other income 19 37 (1,563 ) (274 ) Interest expense 14,920 16,066
63,236 63,394 Equity in earnings of unconsolidated joint ventures,
net (1,260 ) (684 ) (6,462 ) (2,405 ) General and administrative
8,020 8,187 29,079 28,010 Real estate related depreciation and
amortization 37,447 35,368 148,992 130,002 Impairment losses - -
5,635 - Development profit, net of taxes - - (2,016 ) (268 ) Gain
on business combination - - (1,000 ) - Gain on dispositions of real
estate interests (28,024 ) - (39,671 ) - Casualty and involuntary
conversion gain (2 ) - (328 ) (296 ) Institutional capital
management and other fees (345 ) (648 )
(1,739 ) (2,787 ) Total GAAP net
operating income 61,974 55,741 240,477 206,193 Less net operating
income - non-same store properties (9,821 )
(6,706 ) (58,738 ) (31,629 )
Same store GAAP net operating income 52,153 49,035 181,739 174,564
Less revenue from lease terminations (176 ) (18 ) (1,236 ) (733 )
Add early termination straight-line rent adjustment
102 - 456 309
Same store GAAP net operating income,
excluding revenue from lease terminations
52,079 49,017 180,959 174,140 Less straight-line rents, net of
related bad debt expense (669 ) (1,312 ) (3,011 ) (2,529 ) Less
amortization of above/(below) market rents (340 )
(351 ) (1,242 ) (1,412 )
Same store cash net operating income,
excluding revenue from lease terminations
$ 51,070 $ 47,354 $ 176,706 $ 170,199
Financial Measures
Net operating income (“NOI”) is defined as rental revenues,
including expense reimbursements, less rental expenses and real
estate taxes, which excludes institutional capital management fees,
depreciation, amortization, casualty gains, impairment, general and
administrative expenses, equity in (earnings) loss of
unconsolidated joint ventures, interest expense, interest and other
income and income tax expense and other taxes. We consider NOI to
be an appropriate supplemental performance measure because it
reflects the operating performance of our properties and excludes
certain items that are not considered to be controllable in
connection with the management of the property such as
depreciation, amortization, impairment, general and administrative
expenses, interest income and interest expense. Additionally, lease
termination revenue is excluded as it is not considered to be
indicative of recurring operating income. However those measures
should not be viewed as alternative measures of our financial
performance since they exclude expenses which could materially
impact our results of operations. Further, our NOI may not be
comparable to that of other real estate companies, as they may use
different methodologies for calculating NOI, same store NOI
(excluding revenue from lease terminations), and cash basis same
store NOI (excluding revenue from lease terminations). Therefore,
we believe net income (loss) attributable to common stockholders,
as defined by GAAP, to be the most appropriate measure to evaluate
our overall financial performance.
DCT Industrial believes that net income (loss) attributable to
common stockholders, as defined by GAAP, is the most appropriate
earnings measure. However, DCT Industrial considers Funds from
Operations (“FFO”), as defined by the National Association of Real
Estate Investment Trusts (“NAREIT”), to be a useful supplemental,
non-GAAP measure of DCT Industrial’s operating performance. NAREIT
developed FFO as a relative measure of performance of an equity
REIT in order to recognize that the value of income-producing real
estate historically has not depreciated on the basis determined
under GAAP. FFO is generally defined as net income attributable to
common stockholders, calculated in accordance with GAAP, plus real
estate-related depreciation and amortization, less gains from
dispositions of operating real estate held for investment purposes,
plus impairment losses on depreciable real estate and impairments
of in substance real estate investments in investees that are
driven by measurable decreases in the fair value of the depreciable
real estate held by the unconsolidated joint ventures and
adjustments to derive DCT Industrial’s pro rata share of FFO of
unconsolidated joint ventures. We exclude gains and losses on
business combinations and include the gains or losses from
dispositions of properties which were acquired or developed with
the intention to sell or contribute to an investment fund in our
definition of FFO. Although the NAREIT definition of FFO predates
the guidance for accounting for gains and losses on business
combinations, we believe that excluding such gains and losses is
consistent with the key objective of FFO as a performance measure.
We also present FFO excluding acquisition costs, debt modification
costs and impairment losses on properties which are not
depreciable. We believe that FFO excluding acquisition costs, debt
modification costs and impairment losses on non-depreciable real
estate is useful supplemental information regarding our operating
performance as it provides a more meaningful and consistent
comparison of our operating performance and allows investors to
more easily compare our operating results. Readers should note that
FFO captures neither the changes in the value of DCT Industrial’s
properties that result from use or market conditions, nor the level
of capital expenditures and leasing commissions necessary to
maintain the operating performance of DCT Industrial’s properties,
all of which have real economic effect and could materially impact
DCT Industrial’s results from operations. NAREIT’s definition of
FFO is subject to interpretation, and modifications to the NAREIT
definition of FFO are common. Accordingly, DCT Industrial’s FFO may
not be comparable to other REITs’ FFO and FFO should be considered
only as a supplement to net income (loss) as a measure of DCT
Industrial’s performance.
DCT Industrial calculates our fixed charge coverage calculation
based on adjusted EBITDA, which represents net income (loss)
attributable to DCT common stockholders before interest, taxes,
depreciation, amortization, stock-based compensation expense,
noncontrolling interest, impairment losses, and proportionate share
of interest, depreciation and amortization from unconsolidated
joint ventures, and excludes non-FFO gains and losses on disposed
assets and business combinations. We use adjusted EBITDA to measure
our operating performance and to provide investors relevant and
useful information because it allows fixed income investors to view
income from our operations on an unleveraged basis before the
effects of non-cash items, such as depreciation and amortization
and stock-based compensation expense, and irregular items, such as
non-FFO gains or losses from the dispositions of real estate,
impairment losses and gains and losses on business
combinations.
Forward-Looking Statements
We make statements in this report that are considered
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, or the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, which are usually identified by the use of words
such as “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,”
and variations of such words or similar expressions and includes
statements regarding our anticipated yields. We intend these
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and are including this
statement for purposes of complying with those safe harbor
provisions. These forward-looking statements reflect our current
views about our plans, intentions, expectations, strategies and
prospects, which are based on the information currently available
to us and on assumptions we have made. Although we believe that our
plans, intentions, expectations, strategies and prospects as
reflected in or suggested by those forward-looking statements are
reasonable, we can give no assurance that the plans, intentions,
expectations or strategies will be attained or achieved.
Furthermore, actual results may differ materially from those
described in the forward-looking statements and will be affected by
a variety of risks and factors that are beyond our control
including, without limitation: national, international, regional
and local economic conditions, including, in particular, the
strength of the United States economic recovery and global economic
recovery; the general level of interest rates and the availability
of capital; the competitive environment in which we operate; real
estate risks, including fluctuations in real estate values and the
general economic climate in local markets and competition for
tenants in such markets; decreased rental rates or increasing
vacancy rates; defaults on or non-renewal of leases by tenants;
acquisition and development risks, including failure of such
acquisitions and development projects to perform in accordance with
projections; the timing of acquisitions, dispositions and
development; natural disasters such as fires, floods, tornadoes,
hurricanes and earthquakes; energy costs; the terms of governmental
regulations that affect us and interpretations of those
regulations, including the cost of compliance with those
regulations, changes in real estate and zoning laws and increases
in real property tax rates; financing risks, including the risk
that our cash flows from operations may be insufficient to meet
required payments of principal, interest and other commitments;
lack of or insufficient amounts of insurance; litigation, including
costs associated with prosecuting or defending claims and any
adverse outcomes; the consequences of future terrorist attacks or
civil unrest; environmental liabilities, including costs, fines or
penalties that may be incurred due to necessary remediation of
contamination of properties presently owned or previously owned by
us; and other risks and uncertainties detailed in the section of
our Form 10-K filed with the SEC and updated on Form 10-Q entitled
“Risk Factors.” In addition, our current and continuing
qualification as a real estate investment trust, or REIT, involves
the application of highly technical and complex provisions of the
Internal Revenue Code of 1986, or the Code, and depends on our
ability to meet the various requirements imposed by the Code
through actual operating results, distribution levels and diversity
of stock ownership. We assume no obligation to update publicly any
forward looking statements, whether as a result of new information,
future events or otherwise.
DCT Industrial TrustMelissa Sachs,
303-597-2400investorrelations@dctindustrial.com
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