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8-K - FORM 8-K - DCT Industrial Trust Inc.d8k.htm

Exhibit 99.1

On February 8, 2011, DCT Industrial Trust Inc., a real estate investment trust, reported results for the fourth quarter ended December 31, 2010.

Results for the quarter and year ended December 31, 2010

Net loss attributable to common stockholders for the fourth quarter of 2010 was $11.2 million, or $0.05 per diluted share, compared with a net loss of $3.8 million, or $0.02 per diluted share, reported for the fourth quarter of 2009. Net loss attributable to common stockholders for the year ended December 31, 2010 was $37.8 million, or $0.18 per diluted share, compared with a net loss of $18.6 million, or $0.10 per diluted share, for the year ended December 31, 2009.

Funds from Operations (FFO) attributable to common stockholders and unitholders for the fourth quarter of 2010 totaled $23.9 million, or $0.10 per diluted share, excluding $5.3 million, or $0.02 per diluted share, of impairment losses and acquisition costs, compared with $26.9 million, or $0.11 per diluted share, excluding $0.3 million of severance costs and impairment losses, reported for the fourth quarter of 2009.

For the year ended December 31, 2010, FFO attributable to common stockholders and unitholders totaled $93.0 million, or $0.39 per diluted share, excluding $14.4 million of impairment losses, acquisition costs and debt modification costs. This compares with $112.4 million, or $0.50 per diluted share, excluding $3.9 million, or $0.02 per diluted share, of severance costs and impairment losses, reported for the year ended December 31, 2009.

Including impairment losses and acquisition costs, FFO was $0.08 per diluted share for the three months ended December 31, 2010. For the year ended December 31, 2010, including impairment losses, acquisition costs and debt modification costs, FFO was $0.33 per diluted share.

Operating Results and Leasing Activity

As of December 31, 2010, DCT Industrial owned 390 consolidated operating properties, comprised of 56.7 million square feet plus 1.1 million square feet of development and redevelopment properties. DCT Industrial’s consolidated operating portfolio occupancy was 88.9% as of December 31, 2010, up from 86.9% as of September 30, 2010. Including development and redevelopment, the total consolidated portfolio occupancy was 87.4% as of December 31, 2010 up from 84.3% as of September 30, 2010.

For the three months ended December 31, 2010 and 2009, loss from continuing operations was $12.1 million and $3.8 million, respectively. Net operating income was $43.0 million in the fourth quarter of 2010, compared with $43.9 million reported for the fourth quarter of 2009. For the twelve months ended December 31, 2010 and 2009, loss from continuing operations was $40.2 million and 23.5 million respectively. For the twelve months ended December 31, 2010, net operating income totaled $165.8 million compared with $172.9 million earned in 2009. Total consolidated occupancy averaged 82.9% in 2010 compared to 84.0% in 2009.

Fourth quarter 2010 same store net operating income declined 5.7% on a GAAP basis and 6.7% on a cash basis, excluding revenue from lease terminations, when compared to the same period last year. For the year ended December 31, 2010, same store net operating income declined 7.1% on a GAAP basis and 8.8% on a cash basis, excluding revenue from lease terminations, when compared to 2009.

During the fourth quarter of 2010, the Company leased approximately 4.6 million square feet, including 0.3 million square feet of development and redevelopment leases. For the year ended December 31, 2010, the Company signed leases totaling 13.3 million square feet, of which 2.3 million square feet were for development and redevelopment properties. As of December 31, 2010, 1.0 million square feet, or 1.7% of DCT’s total consolidated portfolio of 57.8 million square feet, was leased but not occupied.

The tenant retention rate was 88.6% and 73.8% for the fourth quarter and full year of 2010, respectively. In the fourth quarter of 2010, rental rates on signed leases declined 8.9% on a GAAP basis and 14.0% on a cash basis. In 2010, rental rates declined 8.7% on a GAAP basis and 10.0% on a cash basis with respect to signed leases.

Capital Deployment, Development Update and Disposition Activity

As previously announced, DCT Industrial successfully completed acquisitions with a total value of $111.5 million in 2010, of which $79.1 million was acquired in the fourth quarter. Included in these amounts are $14.0 million owned by third-party non-controlling interests. These acquisitions comprised 1.5 million square feet of industrial properties in coastal and in-fill markets, and also included a 19.3 acre land parcel in the Inland Empire West market. In addition, the Company closed 884,000 square feet, or $46.7 million, of acquisitions in January 2011, which included $9.8 million owned by non-controlling interests. In the Company’s development portfolio, nine properties totaling 2.4 million square feet were stabilized in 2010, of which 0.7 million square feet were stabilized in the fourth quarter. An additional 0.7 million square feet of redevelopment properties were stabilized during 2010. In total, the Company stabilized approximately $150.0 million of projects in 2010 with a remaining pipeline of $131.1 million at December 31, 2010, including its proportionate share of joint ventures.


During the fourth quarter of 2010, DCT Industrial completed the disposition of four light industrial properties comprising 129,000 square feet. These vacant buildings were sold to users for a total sales price of $4.6 million. For the year ended December 31, 2010, DCT Industrial completed sales of 536,000 square feet for a total sales price of $21.6 million.

Balance Sheet

In addition, DCT Industrial raised $43.0 million though its continuous equity offering program during the fourth quarter of 2010 from the issuance of 9.1 million new shares. In 2010, DCT raised $60.4 million through the program. The proceeds from the issuances were used to finance acquisitions.

Dividend

DCT Industrial’s Board of Directors has declared a $0.07 per share quarterly cash dividend, payable on April 19, 2011, to stockholders of record as of April 7, 2011.


DCT INDUSTRIAL TRUST INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(unaudited, in thousands, except share and per share information)

 

     December 31,
2010
    December 31,
2009
 

ASSETS

    

Land

   $ 567,152      $ 519,485   

Buildings and improvements

     2,343,835        2,219,826   

Intangible lease assets

     93,497        116,243   

Construction in progress

     32,952        60,860   
                

Total investment in properties

     3,037,436        2,916,414   

Less accumulated depreciation and amortization

     (528,705 )     (451,242 )
                

Net investment in properties

     2,508,731        2,465,172   

Investments in and advances to unconsolidated joint ventures

     138,455        111,238   
                

Net investment in real estate

     2,647,186        2,576,410   

Cash and cash equivalents

     17,330        19,120   

Notes receivable

     1,222        19,084   

Deferred loan costs, net

     5,883        4,919   

Straight-line rent and other receivables, net of allowance for doubtful accounts of $2,088 and $2,226, respectively

     33,278        31,607   

Other assets, net

     14,990        13,152   
                

Total assets

   $ 2,719,889      $ 2,664,292   
                

LIABILITIES AND EQUITY

    

Liabilities:

    

Accounts payable and accrued expenses

   $ 38,354      $ 36,261   

Distributions payable

     17,458        16,527   

Tenant prepaids and security deposits

     20,759        19,451   

Other liabilities

     12,373        5,759   

Intangible lease liability, net

     18,748        5,946   

Line of credit

     51,000        —     

Senior unsecured notes

     735,000        625,000   

Mortgage notes

     425,359        511,715   
                

Total liabilities

     1,319,051        1,220,659   
                

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, 350,000,000 shares authorized, 222,946,676 and 208,046,167 shares issued and outstanding as of December 31, 2010 and December 31, 2009, respectively

     2,229        2,080   

Additional paid-in capital

     1,898,289        1,817,654   

Distributions in excess of earnings

     (689,127 )     (591,087 )

Accumulated other comprehensive loss

     (15,289 )     (11,012 )
                

Total stockholders’ equity

     1,196,102        1,217,635   

Noncontrolling interests

     204,736        225,998   
                

Total equity

     1,400,838        1,443,633   
                

Total liabilities and equity

   $ 2,719,889      $ 2,664,292   
                


DCT INDUSTRIAL TRUST INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited, in thousands, except per share information)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2010     2009     2010     2009  

REVENUES:

    

Rental revenues

   $ 59,119      $ 59,541      $ 235,284      $ 239,964   

Institutional capital management and other fees

     1,082        653        4,133        2,701   
                                

Total revenues

     60,201        60,194        239,417        242,665   
                                

OPERATING EXPENSES:

        

Rental expenses

     8,212        7,448        33,527        32,532   

Real estate taxes

     7,889        8,150        35,963        34,493   

Real estate related depreciation and amortization

     29,368        28,516        115,123        109,420   

General and administrative

     6,735        8,221        25,262        29,224   

Impairment losses

     4,100        —          8,656        —     
                                

Total operating expenses

     56,304        52,335        218,531        205,669   
                                

Operating income

     3,897        7,859        20,886        36,996   

OTHER INCOME AND EXPENSE:

        

Equity in income (loss) of unconsolidated joint ventures, net

     (786 )     533        (2,986 )     2,698   

Impairment losses on investments in unconsolidated joint ventures

     (216 )     —          (216 )     (300 )

Loss on business combinations

     —          (169 )     (395 )     (10,325 )

Interest expense

     (15,423 )     (12,576 )     (56,903 )     (52,670 )

Interest and other income

     244        364        356        1,918   

Income tax benefit (expense) and other taxes

     138        178        (918 )     (1,846 )
                                

Loss from continuing operations

     (12,146 )     (3,811 )     (40,176 )     (23,529 )

Income (loss) from discontinued operations

     (747 )     (518 )     (2,890 )     1,815   
                                

Loss before gain (loss) on dispositions of real estate interests

     (12,893 )     (4,329 )     (43,066 )     (21,714 )

Gain (loss) on dispositions of real estate interests

     —          (57 )     13        5   
                                

Consolidated net loss of DCT Industrial Trust Inc.

     (12,893 )     (4,386 )     (43,053 )     (21,709 )

Net loss attributable to noncontrolling interests

     1,698        550        5,223        3,124   
                                

Net loss attributable to common stockholders

   $ (11,195 )   $ (3,836 )   $ (37,830 )   $ (18,585 )
                                

EARNINGS PER COMMON SHARE - BASIC:

        

Loss from continuing operations

   $ (0.05 )   $ (0.02 )   $ (0.17 )   $ (0.11 )

Income (loss) from discontinued operations

     0.00        0.00        (0.01 )     0.01   

Gain (loss) on dispositions of real estate interests

     0.00        0.00        0.00        0.00   
                                

Net loss attributable to common stockholders

   $ (0.05 )   $ (0.02 )   $ (0.18 )   $ (0.10 )
                                

EARNINGS PER COMMON SHARE - DILUTED:

        

Loss from continuing operations

   $ (0.05 )   $ (0.02 )   $ (0.17 )   $ (0.11 )

Income (loss) from discontinued operations

     0.00        0.00        (0.01 )     0.01   

Gain (loss) on dispositions of real estate interests

     0.00        0.00        0.00        0.00   
                                

Net loss attributable to common stockholders

   $ (0.05 )   $ (0.02 )   $ (0.18 )   $ (0.10 )
                                

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

        

Basic and diluted

     218,723        207,291        212,412        192,900   
                                


Reconciliation of Loss Attributable to Common Stockholders and Unitholders to Funds From Operations

(unaudited, in thousands, except per share information)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2010     2009     2010     2009  

Net loss attributable to common stockholders

   $ (11,195 )   $ (3,836 )   $ (37,830 )   $ (18,585 )

Adjustments:

        

Real estate related depreciation and amortization

     29,386        28,772        115,904        111,250   

Equity in (income) loss of unconsolidated joint ventures, net

     786        (533 )     2,986        (2,698 )

Equity in FFO of unconsolidated joint ventures

     921        2,348        4,001        11,807   

Less: loss on business combinations

     —          169        395        10,325   

Less: (gain) loss on dispositions of real estate interest

     —          149        (2,091 )     (1,354 )

Gain on dispositions of non-depreciated real estate

     —          (43 )     13        783   

Noncontrolling interest in the operating partnership’s share of the above adjustment

     (3,283 )     (3,625 )     (13,426 )     (17,907 )

FFO attributable to unitholders

     1,941        3,124        8,678        14,881   
                                

FFO attributable to common stockholders and unitholders, basic and diluted

     18,556        26,525        78,630        108,502   
                                

Adjustments:

        

Impairment losses (1)

     4,591        51        12,004        981   

Debt modification costs

     —          —          1,136        —     

Acquisition costs

     706        —          1,228        —     

Severance costs

     —          297        —          2,966   
                                

FFO, as adjusted, attributable to common stockholders and unitholders, basic and diluted

   $ 23,853      $ 26,873      $ 92,998      $ 112,449   
                                

FFO per common share and unit, basic and diluted

   $ 0.08      $ 0.11      $ 0.33      $ 0.48   
                                

FFO, as adjusted, per common share and unit, basic and diluted

   $ 0.10      $ 0.11      $ 0.39      $ 0.50   
                                

FFO weighted average common shares and units outstanding:

        

Common shares for earnings per share – basic

     218,723        207,291        212,412        192,900   

Participating securities

     1,722        1,376        1,689        1,535   

Units

     25,721        28,215        26,351        30,660   
                                

FFO weighted average common shares, participating securities and units outstanding – basic

     246,166        236,882        240,452        225,095   

Dilutive common stock equivalents

     401        366        357        189   
                                

FFO weighted average common shares, participating securities and units outstanding – diluted

     246,567        237,248        240,809        225,284   
                                

 

(1) Excluding amounts attributable to noncontrolling interests.


The following table is a reconciliation of our property net operating income to our reported “Loss from continuing operations” for the three and twelve months ended December 31, 2010 and 2009 (in thousands):

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2010     2009     2010     2009  

Loss from continuing operations

   $ (12,146 )   $ (3,811 )   $ (40,176 )   $ (23,529 )

Income and other taxes

     (138 )     (178 )     918        1,846   

Interest and other income

     (244 )     (364 )     (356 )     (1,918 )

Interest expense

     15,423        12,576        56,903        52,670   

Equity in (income) loss of unconsolidated joint ventures, net

     786        (533 )     2,986        (2,698 )

General and administrative

     6,735        8,221        25,262        29,224   

Real estate related depreciation and amortization

     29,368        28,516        115,123        109,420   

Loss on business combinations

     —          169        395        10,325   

Impairment losses

     4,316        —          8,872        300   

Institutional capital management and other fees

     (1,082 )     (653 )     (4,133 )     (2,701 )
                                

Total net operating income

     43,018        43,943        165,794        172,939   

Less net operating income – non-same store properties

     (2,107 )     (490 )     (10,377 )     (4,129 )
                                

Same store net operating income

     40,911        43,453        155,417        168,810   

Less revenue from lease terminations

     (104 )     (167 )     (424 )     (2,018 )
                                

Same store net operating income, excluding revenue from lease terminations

     40,807        43,286        154,993        166,792   

Less straight-line rents, net of related bad debt expense

     (824 )     (579 )     (3,237 )     (797 )

Add back amortization of above/(below) market rents

     (38 )     87        561        1,064   
                                

Same store cash net operating income, excluding revenue from lease terminations

   $ 39,945      $ 42,794      $ 152,317      $ 167,059   
                                


Financial Measures

Net operating income (“NOI”) is defined as rental revenues, including reimbursements, less rental expenses and real estate taxes, which excludes depreciation, amortization, impairment, general and administrative expenses and interest expense. 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. 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). Additionally, lease termination revenue is excluded as it is not considered to be indicative of recurring operating income. 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.

We believe that net income (loss) attributable to common stockholders, as defined by GAAP, is the most appropriate earnings measure. However, we consider FFO as defined by the National Association of Real Estate Investment Trusts, or NAREIT, to be a useful supplemental, non-GAAP measure of our 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 (loss) attributable to common stockholders, calculated in accordance with GAAP, plus real estate-related depreciation and amortization, less gain (or loss) from dispositions of operating real estate held for investment purposes and adjustments to derive our proportionate 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 as defined by GAAP, 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 severance, acquisition costs, debt modification costs and impairment losses. We believe that FFO excluding severance, acquisition costs and debt modification costs, which are non-routine items, and impairment losses 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 without taking into account the unrelated impairment losses relating to the decrease in value of certain real estate assets and investments in unconsolidated joint ventures. Readers should note that FFO captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations. NAREIT’s definition of FFO is subject to interpretation, and modifications to the NAREIT definition of FFO are common. Accordingly, our FFO may not be comparable to other REITs’ FFO and FFO should be considered only as a supplement to net income (loss) attributable to common stockholders as a measure of our performance.