FFO of $0.12 per Share in Q3
Same-Store NOI Growth of 6.2 Percent on a
Cash Basis and 5.9 Percent on a GAAP Basis
Consolidated Operating Occupancy Increased
60 Basis Points to 93.5 Percent in Q3
Rent Growth of 12.9 Percent on a GAAP Basis
and 5.7 Percent on a Cash Basis
Since June 30, Acquired 2.7 Million Square
Feet for $179.7 Million;Sold 5.4 Million Square Feet and
46.0 Acres for $217.3 Million, Exiting Columbus, OH
Since June 30, Commenced Construction on 1.8
Million Square Feet and Acquired 42.9 Acres for the Development of
an Additional 538,000 Square Feet
Company Raised FFO Guidance
DCT Industrial Trust® (NYSE: DCT), a leading industrial
real estate company, today announced financial results for the
quarter ending September 30, 2014.
“DCT had an excellent quarter. Our operating business continues
to perform very well and we took another big step forward with our
portfolio repositioning through the sale of all of our Columbus
assets at favorable pricing,” said Phil Hawkins, Chief Executive
Officer of DCT Industrial. “The efforts of our market teams
combined with the results of active portfolio management and strong
market fundamentals show in our key operating metrics. Leasing
activity, portfolio occupancy, rent spreads and same-store NOI
growth all came in at levels that met or exceeded our expectations
and bode well for the future.”
Funds from operations, as adjusted, attributable to common
stockholders and unitholders (“FFO”) for Q3 2014 totaled $43.7
million, or $0.12 per diluted share, compared with $39.3 million,
or $0.12 per diluted share, for Q3 2013. These results exclude $0.7
million and $0.4 million of acquisition costs for the quarters
ending September 30, 2014 and 2013, respectively.
FFO for the nine months ending September 30, 2014 totaled $124.2
million, or $0.36 per diluted share, compared with $106.2 million
or $0.34 per diluted share, for the same period in 2013. These
results exclude $2.1 million and $1.6 million of acquisition costs
for the nine months ending September 30, 2014 and 2013,
respectively.
Net income attributable to common stockholders for Q3 2014 was
$12.4 million, or $0.04 per diluted share, compared with net loss
attributable to common stockholders of $10.2 million, or $0.03 per
diluted share, reported for Q3 2013. Net income attributable to
common stockholders for the nine months ending September 30, 2014
was $19.5 million, or $0.06 per diluted share, compared with net
income of $1.9 million, or $0.00 per diluted share, for the nine
months ending September 30, 2013.
Property Results and Leasing
Activity
As of September 30, 2014, DCT Industrial owned 401 consolidated
operating properties, totaling 64.9 million square feet, with
occupancy of 93.5 percent, an increase of 60 basis points over Q2
2014 and an increase of 70 basis points over Q3 2013. Also,
approximately 1.0 million square feet, or 1.6 percent of DCT
Industrial’s total consolidated portfolio was leased but not
occupied at September 30, 2014.
In Q3 2014, the Company signed leases totaling 2.9 million
square feet with rental rates increasing 12.9 percent on a GAAP
basis and 5.7 percent on a cash basis, compared to the
corresponding expiring leases. Over the previous four quarters,
rental rates on signed leases increased 13.1 percent on a GAAP
basis and 5.1 percent on a cash basis. The Company’s tenant
retention rate was 69.0 percent in Q3 2014.
Net operating income (“NOI”) was $61.3 million in Q3 2014,
compared with $53.3 million in Q3 2013. In Q3 2014 same-store NOI,
excluding revenue from lease terminations, increased 5.9 percent on
a GAAP basis and 6.2 percent on a cash basis, when compared to Q3
2013. Same-store occupancy averaged 94.1 percent in Q3 2014, an
increase of 150 basis points over Q3 2013. Same-store occupancy as
of September 30, 2014 was 93.9 percent.
Investment Activity
Acquisitions
Since June 30, 2014, DCT Industrial acquired 16 buildings for
$179.7 million. Totaling 2.7 million square feet, these buildings
were 77.2 percent occupied at the time of closing. The Company
expects a year-one weighted-average cash yield of 3.6 percent and
anticipates a weighted-average cash yield of 6.1 percent on the
acquired assets.
The table below summarizes acquisitions since June 30, 2014:
Market Submarket Square Feet Occupancy
Closed
AnticipatedYield*
Houston, TX (2 buildings) Northwest 178,000
0.0% July-14 7.0% Chicago, IL I-55 650,000 100.0%
Aug-14 5.7% Houston, TX Northloop 98,000 0.0% Aug-14 7.1% Chicago,
IL O’Hare 228,000 5.6% Aug-14 6.9% Northern California Central
Valley 750,000 100.0% Sept-14 4.9% Southern California Carlsbad
111,000 44.0% Sept-14 7.1% Seattle, WA Sumner 120,000 100.0%
Sept-14 6.5% New Jersey Exit 10/Route 287 64,000 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 6.8% Atlanta, GA
I-75 Northwest 151,000 100.0% Oct-14
6.5% Total/Weighted Average 2,744,000 77.2% 6.1%
*Anticipated yield represents year-one cash yield for stabilized
acquisitions and projected stabilized cash yield for value-add
acquisitions.
Redevelopment
The acquisitions in the table above include two redevelopment
properties. The first building, located in the Northloop submarket
of Houston, was vacant at the time of acquisition. The Company has
executed a full-building lease which will commence after
renovations are complete. The second redevelopment property,
located in the O’Hare submarket of Chicago, is 5.6 percent occupied
and will undergo extensive renovations while being actively
marketed for lease.
Development
In July, DCT Industrial executed a 203,000 square foot lease for
DCT 55, which will stabilize the 604,000 square foot building
located in the I-55 submarket of Chicago; and executed a 105,000
square foot lease for DCT Sumner South Distribution Center,
bringing the 188,000 square foot building located in the South Kent
Valley submarket of Seattle, to 56.0 percent leased. In September,
the Company executed a 15,000 square foot lease for DCT Beltway
Tanner Business Park, which will stabilize the 133,000 square foot
building located in the Northwest submarket of Houston.
Since June 30, 2014, the Company purchased 42.9 acres of land
for $10.0 million comprised of 36.0 acres in the Lehigh Valley
submarket of Pennsylvania for development of DCT Chrin Commerce
Centre, a 426,000 square foot building, and 6.9 acres in the O’Hare
submarket of Chicago for the development of DCT O’Hare Logistics
Center, a 112,000 square foot building.
Development projects started since June 30, 2014:
- 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.
- DCT Chrin Commerce Centre, a 426,000
square foot building located in the Lehigh Valley submarket of
Pennsylvania. The project is slated for completion in Q2 2015.
- 8th & Vineyard buildings C, D, and
E, located in the Inland Empire West submarket of Southern
California. Buildings C and E are build-to-suits for sale totaling
95,000 square feet, while building D is a 64,000 square foot
speculative development. All three buildings are slated for
completion in Q1 2015.
- DCT Frankford Trade Center, an 82,000
square foot building located in the Northwest submarket of Dallas.
The building is slated for completion in Q1 2015.
- DCT River West, a 733,000 square foot
building located in the I-20/West submarket of Atlanta. The
building is slated for completion in Q1 2015.
- DCT Northwest Crossroads Logistics
Centre II, a 320,000 square foot building located in the Northwest
submarket of Houston. The building is slated for completion in Q1
2015.
Dispositions
Since June 30, 2014, DCT Industrial sold 25 buildings totaling
5.4 million square feet. This includes approximately 3.5 million
square feet in Columbus marking the Company’s exit from that
market. Additionally, the Company sold 46.0 acres of land located
in the Northern submarket of Cincinnati. These transactions
generated total gross proceeds of $217.3 million and have an
expected year-one weighted average cash yield of 6.7 percent.
The table below summarizes the dispositions since June 30,
2014:
Market Submarket Square Feet Occupancy
Closed New Jersey* Essex County/Fairfield 107,000
100.0% July-14 Baltimore / DC (3 buildings) Harford
County 347,000 100.0% July-14 New Jersey (2 buildings) Newcastle
County 275,000 97.1% July-14 New Jersey (2 buildings) Delaware
County 160,000 96.9% July-14 Cincinnati, OH (2 buildings) Northern
840,000 100.0% Aug-14 Atlanta, GA* Northwest 52,000 0.0% Aug-14
Dallas, TX* Great Southwest 21,000 0.0% Sept-14 Columbus, OH (12
buildings) 3,480,000 97.7% Oct-14 Pennsylvania* Lehigh
Valley 112,000 0.0% Oct-14 Total/Weighted
Average 5,394,000 94.8%
*Building sold to a user.
Capital Markets
Since June 30, 2014, DCT Industrial raised $40.8 million in net
proceeds from the sale of common stock through its “at the market”
equity offering. The Company issued approximately 5.3 million
shares at an average price of $7.87 per share. The proceeds were
used for acquisitions, development activities and for general
corporate purposes.
Dividend
DCT Industrial’s Board of Directors has declared a $0.28 per
share quarterly cash dividend (reflecting the impact of the
previously announced reverse stock split), payable on January 10,
2015 to stockholders of record as December 24, 2014.
Guidance
The Company raised the bottom end and narrowed 2014 FFO
guidance, as adjusted, to $1.87 to $1.92 per diluted share, up from
$1.84 to $1.92 per diluted share (reflecting the impact of the
previously announced reverse stock split). Additionally, net income
attributable to common stockholders and unitholders is expected to
be between $0.22 and $0.27 per diluted share.
The Company’s FFO guidance excludes acquisition costs.
Conference Call
Information
DCT Industrial will host a conference call to discuss Q3 2014
results on Friday, October 31, 2014 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, November 14,
2014 and can be accessed by dialing (877) 344-7529 or (412)
317-0088 and entering the passcode 10053316. 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 October 31,
2015.
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 September 30,
2014, the Company owned interests in approximately 74.3 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
SUBSIDIARIESConsolidated Balance Sheets(in thousands,
except share information)
September 30, December 31, 2014
2013 ASSETS (unaudited) Land $ 917,627 $ 883,804
Buildings and improvements 2,661,452 2,615,879 Intangible lease
assets 85,732 82,758 Construction in progress 130,879
88,610
Total investment in properties 3,795,690 3,671,051
Less accumulated depreciation and amortization (678,740 )
(654,097)
Net investment in properties 3,116,950
3,016,954 Investments in and advances to unconsolidated joint
ventures 99,229 124,923
Net investment in real
estate 3,216,179 3,141,877 Cash and cash equivalents 26,326
32,226 Restricted cash 3,526 12,621 Deferred loan costs, net 8,584
10,251
Straight-line rent and other receivables,
net of allowance for doubtful accounts of $886 and
$2,178, respectively
50,988 46,247 Other assets, net 18,084 14,545 Assets held for sale
115,446 8,196
Total assets $ 3,439,133 $
3,265,963
LIABILITIES AND EQUITY Liabilities:
Accounts payable and accrued expenses $ 85,496 $ 63,281
Distributions payable 24,807 23,792 Tenant prepaids and security
deposits 26,378 28,542 Other liabilities 11,874 10,122 Intangible
lease liabilities, net 22,791 20,389 Line of credit 132,000 39,000
Senior unsecured notes 1,122,566 1,122,407 Mortgage notes 286,290
290,960 Liabilities related to assets held for sale 3,373
278
Total liabilities 1,715,575
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 335,052,587 and320,265,949 shares issued and
outstanding as of September 30, 2014 andDecember 31, 2013,
respectively
3,351 3,203 Additional paid-in capital 2,622,636 2,512,024
Distributions in excess of earnings (991,241 ) (941,019)
Accumulated other comprehensive loss (27,860 )
(30,402)
Total stockholders’ equity 1,606,886 1,543,806
Noncontrolling interests 116,672 123,386
Total
equity 1,723,558 1,667,192
Total liabilities
and equity $ 3,439,133 $ 3,265,963
DCT INDUSTRIAL TRUST INC. AND
SUBSIDIARIESConsolidated Statements of
Operations(unaudited, in thousands, except per share
information)
Three Months Ended Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 REVENUES: Rental
revenues $ 84,285 $ 73,111 $ 250,206 $ 209,744 Institutional
capital management and other fees 322 619
1,394 2,139
Total revenues 84,607
73,730 251,600 211,883
OPERATING
EXPENSES: Rental expenses 9,672 8,779 31,507 26,073 Real estate
taxes 13,288 11,032 40,196 33,218 Real estate related depreciation
and amortization 37,842 32,843 111,545 94,634 General and
administrative 6,727 6,120 21,059 19,823 Impairment losses 900 -
5,635 - Casualty and involuntary conversion (gain) loss 14
(294 ) (326 ) (296 )
Total operating
expenses 68,443 58,480 209,616
173,452
Operating income 16,164 15,250 41,984 38,431
OTHER INCOME (EXPENSE): Development profit, net of taxes - -
2,016 268 Equity in earnings of unconsolidated joint ventures, net
892 759 5,202 1,721 Gain on business combination - - 1,000 - Gain
on dispositions of real estate interests 10,230 - 11,647 - Interest
expense (16,078 ) (15,141 ) (48,316 ) (47,328 ) Interest and other
income 1,577 83 1,582 310 Income tax benefit (expense) and other
taxes 73 59 257 (373 )
Income (loss)
from continuing operations 12,858 1,010 15,372 (6,971 ) Income
(loss) from discontinued operations 352 (11,793 )
5,576 9,491
Consolidated net income (loss) of DCT
Industrial Trust Inc. 13,210 (10,783 ) 20,948 2,520 Net
(income) loss attributable to noncontrolling interests (801
) 626 (1,421 ) (589 )
Net income (loss)
attributable to common stockholders 12,409
(10,157 ) 19,527 1,931
Distributed and undistributed earnings
allocated to participating securities
(171 ) (173 ) (507 ) (519 )
Adjusted
net income (loss) attributable to common stockholders $ 12,238
$ (10,330 ) $ 19,020 $ 1,412
EARNINGS PER COMMON SHARE -
BASIC Income (loss) from continuing operations $ 0.04 $ 0.00 $
0.04 $ (0.03 ) Income (loss) from discontinued operations
0.00 (0.03 ) 0.02 0.03 Net income (loss)
attributable to common stockholders $ 0.04 $ (0.03 ) $ 0.06 $ 0.00
EARNINGS PER COMMON SHARE - DILUTED Income (loss)
from continuing operations $ 0.04 $ 0.00 $ 0.04 $ (0.03 ) Income
(loss) from discontinued operations 0.00 (0.03 )
0.02 0.03 Net income (loss) attributable to common
stockholders $ 0.04 $ (0.03 ) $ 0.06 $ 0.00
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING: Basic 333,562 304,768
328,908 292,352 Diluted 334,764 305,673
330,034 292,352 Distributions declared per common
share $ 0.07 $ 0.07 $ 0.21 $ 0.21
Reconciliation of Net Income
Attributable to Common Stockholders to Funds from
Operations(unaudited, in thousands, except per share and
unit data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2014 2013 2014 2013
Reconciliation of net income (loss)
attributable to common stockholders to FFO:
Net income (loss) attributable to common stockholders $ 12,409 $
(10,157 ) $ 19,527 $ 1,931 Adjustments: Real estate related
depreciation and amortization 37,842 34,732 111,545 101,593 Equity
in earnings of unconsolidated joint ventures, net (892 ) (759 )
(5,202 ) (1,721 ) Equity in FFO of unconsolidated joint ventures
2,728 2,735 7,990 7,530 Impairment losses on depreciable real
estate 900 13,279 5,767 13,279 Gain on business combination - -
(1,000 ) - Gain on dispositions of real estate interests (10,500 )
(75 ) (17,034 ) (17,614 ) Gain on dispositions of non-depreciable
real estate - - 98 31 Noncontrolling interest in the above
adjustments (1,640 ) (3,227 ) (5,680 ) (7,066 ) FFO attributable to
unitholders 2,103 2,320 6,153 6,602 FFO
attributable to common stockholders and unitholders(1)
42,950 38,848 122,164 104,565 Adjustments:
Acquisition costs 716 443 2,050 1,648
FFO, as adjusted, attributable to common
stockholders and unitholders - basic and diluted
$ 43,666 $ 39,291 $ 124,214 $ 106,213 FFO per common share
and unit — basic and diluted $ 0.12 $ 0.12 $ 0.35 $ 0.33
FFO, as adjusted, per common share and unit — basic and diluted $
0.12 $ 0.12 $ 0.36 $ 0.34 FFO weighted average common shares
and units outstanding: Common shares for earnings per share - basic
333,562 304,768 328,908 292,352 Participating securities 2,485
2,526 2,400 2,445 Units 17,152 18,620 17,443
19,513
FFO weighted average common shares,
participating securities and units outstanding – basic
353,199 325,914 348,751 314,310 Dilutive common stock equivalents
1,202 905 1,126 868
FFO weighted average common shares,
participating securities and units outstanding – diluted
354,401 326,819 349,877 315,178
(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-Year2014
Guidance: Low High Earnings per common
share - diluted $ 0.22 $ 0.27 Real estate related
depreciation and amortization(1) 1.75 1.75 Impairment and
acquisition costs 0.10 0.10 Gains on sale of depreciated property
(0.20 ) (0.20 ) FFO, as adjusted, per common
share and unit-diluted(2) $ 1.87 $ 1.92
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 nine
months endedSeptember 30, 2014 and 2013 (in
thousands):
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2014 2013 2014 2013 Net
income (loss) attributable to common stockholders(1) $
12,409 $ (10,157 ) $ 19,527 $ 1,931 Interest
expense 16,078 15,141 48,316 47,328 Proportionate share of interest
expense from unconsolidated joint ventures 369 398 1,047 1,257 Real
estate related depreciation and amortization 37,842 34,732 111,545
101,593
Proportionate share of real estate related
depreciation and amortization from unconsolidated joint
ventures
1,344 1,478 4,155 4,440 Income tax (benefit) expense and other
taxes (73 ) (42 ) (225 ) 390 Stock-based compensation 1,190 1,030
3,410 2,905 Noncontrolling interests 801 (626 ) 1,421 589 Non-FFO
gain on business combination - - (1,000 ) - Non-FFO gain on
dispositions of real estate interests (10,500 ) (75 ) (16,936 )
(17,583 ) Impairment losses 900 13,279
5,767 13,279 Adjusted EBITDA $
60,360 $ 55,158 $ 177,027 $ 156,129
CALCULATION OF FIXED CHARGES Interest expense $ 16,078 $ 15,141 $
48,316 $ 47,328 Capitalized interest 2,160 2,107 6,119 6,058
Amortization of loan costs and debt premium/discount (127 ) (55 )
(383 ) (155 ) Other noncash interest expense (1,027 ) (1,000 )
(3,078 ) (3,000 ) Proportionate share of interest expense from
unconsolidated joint ventures 369 398
1,047 1,257 Total fixed charges $
17,453 $ 16,591 $ 52,021 $ 51,488
Fixed charge coverage 3.5 3.3
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
netoperating income for the three and nine months ended
September 30, 2014 and 2013 (in thousands):
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2014 2013 2014 2013
Reconciliation of income (loss) from continuing operations to
NOI: Income (loss) from continuing
operations $ 12,858 $ 1,010 $ 15,372 $ (6,971 ) Income tax
(benefit) expense and other taxes (73 ) (59 ) (257 ) 373 Interest
and other income (1,577 ) (83 ) (1,582 ) (310 ) Interest expense
16,078 15,141 48,316 47,328 Equity in earnings of unconsolidated
joint ventures, net (892 ) (759 ) (5,202 ) (1,721 ) General and
administrative 6,727 6,120 21,059 19,823 Real estate related
depreciation and amortization 37,842 32,843 111,545 94,634
Impairment losses 900 - 5,635 - Development profit, net of taxes -
- (2,016 ) (268 ) Gain on business combination - - (1,000 ) - Gain
on dispositions of real estate interests (10,230 ) - (11,647 ) -
Casualty and involuntary conversion (gain) loss 14 (294 ) (326 )
(296 ) Institutional capital management and other fees
(322 ) (619 ) (1,394 )
(2,139 ) Total GAAP net operating income 61,325 53,300
178,503 150,453 Less net operating income - non-same store
properties (8,761 ) (3,390 )
(35,107 ) (12,200 ) Same store GAAP net
operating income 52,564 49,910 143,396 138,253 Less revenue from
lease terminations (260 ) (517 ) (1,161 ) (828 ) Add early
termination straight-line rent adjustment 59
57 420 310
Same store GAAP net operating income,
excluding revenue from lease terminations
52,363 49,450 142,655 137,735 Less straight-line rents, net of
related bad debt expense (632 ) (720 ) (3,054 ) (2,053 ) Less
amortization of above/(below) market rents (394 )
(404 ) (1,038 ) (1,184 )
Same store cash net operating income,
excluding revenue from lease terminations
$ 51,337 $ 48,326 $ 138,563 $ 134,498
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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