Attached files

file filename
8-K - FORM 8-K - DCT Industrial Trust Inc.d479980d8k.htm
EX-99.2 - EXHIBIT 99.2 - DCT Industrial Trust Inc.d479980dex992.htm

Exhibit 99.1

 

LOGO    Press Release

FOR IMMEDIATE RELEASE:

DCT INDUSTRIAL TRUST INC. ® REPORTS FOURTH QUARTER AND

2012 FULL-YEAR RESULTS

Same-Store NOI Growth of 8.6 Percent on a Cash Basis and 4.9 Percent on a GAAP Basis in Q4;

Average Same-Store Occupancy Increased 170 Basis Points Year-over-Year to 91.7 Percent

Consolidated Operating Occupancy Increased 50 Basis Points to 92.3 Percent in Q4

Rental Rates Increased 15.3 Percent on a GAAP Basis and 3.4 Percent on a Cash Basis in Q4

Acquired 21 Buildings for $241.7 Million and Sold Seven Buildings for $111.1 Million in Q4

Funds from Operations of $0.11 per Share in Q4 and $0.42 per Share in 2012;

an Increase of 5.0 Percent Year-over-Year

DENVER, February 7, 2013 – DCT Industrial Trust Inc.® (NYSE: DCT), a leading industrial real estate company, today announced financial results for the three months and year ending December 31, 2012.

“2012 was an excellent year across all fronts. We surpassed our operating, capital deployment and capital recycling goals and we continue to build a successful development program,” said Phil Hawkins, Chief Executive Officer of DCT Industrial. “For the year, we acquired 32 buildings for $338.4 million and grew our assets under active development to $128.2 million. In addition we purchased eight land sites which will support development of 4.5 million square feet. Since December 31, 2011, we sold 40 buildings, totaling 6.2 million square feet, further enhancing the cash flow growth of our portfolio.”

Funds from Operations, as adjusted, attributable to common stockholders and unitholders (“FFO”) for the fourth quarter of 2012 totaled $33.0 million, or $0.11 per diluted share, compared with $30.0 million, or $0.11 per diluted share, for the fourth quarter of 2011. These results exclude $1.0 million and $0.5 million of acquisition costs for the quarters ending December 31, 2012 and 2011, respectively.

For the year ending December 31, 2012, FFO totaled $118.1 million, or $0.42 per diluted share, compared with $106.7 million, or $0.40 per diluted share, for the year ending December 31, 2011. These results exclude $2.0 million and $1.9 million of acquisition costs for the year ending December 31, 2012 and 2011, respectively.

Net loss attributable to common stockholders for the fourth quarter of 2012 was $0.8 million, or $0.00 per diluted share, compared with a net loss attributable to common stockholders of $0.2 million, or $0.00 per diluted share, reported for the fourth quarter of 2011. Net loss attributable to common stockholders for the year ending December 31, 2012 was $15.1 million, or $0.06 per diluted share, compared with a net loss of $25.3 million, or $0.11 per diluted share, for the year ending December 31, 2011.

518 17TH STREET, 8TH FLOOR¿ DENVER, CO 80202

303.597.2400 ¿ DCTINDUSTRIAL.COM


Property Results and Leasing Activity

As of December 31, 2012, DCT Industrial owned 402 consolidated operating properties, totaling 60.1 million square feet, with occupancy of 92.3 percent up from 91.8 percent as of September 30, 2012 and up 170 basis points from December 31, 2011. Including development and redevelopment, total consolidated occupancy was 90.4 percent as of December 31, 2012, compared to 91.0 percent as of September 30, 2012 and 90.5 percent as of December 31, 2011. In addition, 0.7 million square feet, or 1.1 percent of DCT Industrial’s total consolidated portfolio, was leased but not yet occupied.

Net operating income (“NOI”) was $50.5 million in the fourth quarter of 2012, compared with $44.3 million in the fourth quarter of 2011. In the fourth quarter of 2012, same-store NOI, excluding revenue from lease terminations, increased 8.6 percent on a cash basis and 4.9 percent on a GAAP basis, when compared to the same period of 2011. Same-store occupancy averaged 91.7 percent in the fourth quarter of 2012, an increase of 170 basis points over the fourth quarter of 2011. Same-store occupancy, as of December 31, 2012, was 92.1 percent.

In the fourth quarter of 2012, the Company signed leases totaling 3.3 million square feet. For the year ending December 31, 2012, DCT Industrial signed leases totaling 15.5 million square feet compared with 14.9 million square feet for the year ending December 31, 2011. In the fourth quarter of 2012, rental rates on signed leases increased 15.3 percent on a GAAP basis and 3.4 percent on a cash basis compared to the corresponding expiring leases. For the full year 2012, rental rates on signed leases increased 4.6 percent on a GAAP basis and decreased 2.8 percent on a cash basis. The Company’s tenant retention rate was 75.7 percent in the fourth quarter of 2012 and 73.4 percent for the year ending December 31, 2012.

Investment Activity

Joint Venture Acquisition

The Company successfully purchased its joint venture partner’s 80 percent interest in DCT Fund I, for an incremental investment of $78.2 million. The six buildings in the portfolio are located in Atlanta, Central Pennsylvania, Chicago, Dallas, Memphis and New Jersey and total 2.6 million square feet. Subsequently, DCT Industrial sold the buildings in Atlanta and Memphis to a third party in January. The portfolio, after the sale of the Atlanta and Memphis assets, has a year-one weighted-average cash yield of 6.5 percent and a weighted-average projected stabilized cash yield of 7.2 percent.

 

Market

   Submarket    Square Feet      Occupancy  

Atlanta, GA*

   Henry County      578,000         76.2

Central Pennsylvania

   Lehigh Valley      100,000         100.0

Chicago, IL

   Southwest Suburbs      303,000         100.0

Dallas, TX

   Alliance      540,000         100.0

Memphis, TN*

   Southeast/Shelby      1,039,000         74.1

New Jersey

   Somerset      88,000         100.0
     

 

 

    

 

 

 

Total/Weighted Average

        2,648,000         84.6

 

* Asset sold to third party in January 2013

Acquisitions

In addition to the joint venture portfolio, DCT Industrial acquired 15 buildings at a total cost of $163.5 million in the fourth quarter. The buildings, located in Chicago, Houston, Northern California, Seattle and Southern California, total 1.8 million square feet. The Company expects a year-one weighted-average cash yield of 6.3 percent and a weighted-average projected stabilized cash yield of 6.6 percent on these assets.

 

2


For the full year ending December 31, 2012, including the purchase of the joint venture portfolio, the Company acquired 32 buildings, totaling 6.2 million square feet for a total of $338.4 million. The Company expects a year-one weighted-average cash yield of 6.3 percent and a weighted-average projected stabilized cash yield of 7.1 percent.

The table below represents a summary of the acquisitions in the fourth quarter:

 

Market

   Submarket   Square Feet      Occupancy     Closed      Anticipated
Yield*
 

Chicago, IL

   O’Hare     105,000         0.0     Oct-12         8.2

Seattle, WA

   Kent Valley     26,000         0.0     Oct-12         6.8

Southern California (4 buildings)

   San Gabriel Valley     211,000         100.0     Oct-12         6.2

Air Freight Portfolio

   LAX (3 buildings)     471,000         99.6     Nov-12         6.5

(4 buildings)

   O’Hare (1 building)     92,000         100.0     Nov-12         6.5

Northern California

   Oakland     337,000         100.0     Dec-12         6.2

Chicago, IL

   I-88/Fox Valley     163,000         100.0     Dec-12         7.3

Houston, TX (2 buildings)

   Port of Houston     313,000         100.0     Dec-12         7.3

Chicago, IL

   Northern DuPage County     67,000         100.0     Dec-12         8.4
    

 

 

    

 

 

      

 

 

 

Total/Weighted Average

       1,785,000         92.6        6.6

 

* Anticipated yield represents year-one cash yield for stabilized acquisitions and projected stabilized cash yield for value-add acquisitions.

Development

In the fourth quarter, DCT Industrial invested $40.5 million to acquire 5 land parcels for the future development of approximately 3.0 million square feet. The land is located in some of the most highly sought after submarkets of Atlanta, Houston, Seattle and Southern California.

The table below represents a summary of land acquired in the fourth quarter:

 

Market

   Submarket    Acres      Project Name    Number of
Buildings
     Estimated
Square Feet
 

Atlanta, GA

   I-20 West      47.2       DCT River West      1         733,000   

Houston, TX

   Northwest      11.0       DCT Beltway Tanner
Business Park
     1         133,000   

Seattle, WA

   Kent Valley      46.3       DCT White River Corporate
Center
     2         1,018,000   

Seattle, WA

   Kent Valley      9.3       DCT Sumner South
Distribution Center
     1         190,000   

Southern California

   Inland Empire West      42.2       DCT Rialto Logistics Center      1         928,000   
     

 

 

       

 

 

    

 

 

 

Total

        156.0            6         3,002,000   

In addition, DCT Industrial:

 

   

Completed the expansion of Building 3 at SCLA in Southern California, which is fully leased to Newell Rubbermaid.

 

   

Commenced construction on the pre-leased 652,000 square foot Slover Logistics Center I in Southern California. The building is expected to be completed and the lease commenced by Q3 of 2013.

 

   

Committed to start a build-to-suit on Building A at 8th and Vineyard, in Southern California. Construction is expected to commence in Q1 of 2013 and the building is under contract to be sold to the user upon completion.

 

   

Commenced construction of DCT Airtex Industrial Center, a 267,000 square foot building in North Houston, located along Interstate 45. The building is slated for completion in Q3 of 2013.

 

3


As of December 31, 2012, the Company had under active development, including recently stabilized buildings, $128.2 million which is 70.0 percent leased.

Dispositions

During the fourth quarter of 2012, the Company committed to sell a portfolio of six assets. Five buildings closed in the fourth quarter, and the sixth building is held for sale and scheduled to close in the first quarter of 2013. Additionally, as mentioned in the Joint Venture Acquisition section, DCT Industrial sold two buildings in Atlanta and Memphis in January.

The seven buildings that closed since September 30, 2012, total 3.7 million square feet and are located in Atlanta, Columbus and Memphis. The dispositions generated gross proceeds of $111.1 million. Including the held-for-sale building scheduled to close in the first quarter of 2013, we expect to generate gross proceeds of $122.4 million with a projected year-one weighted-average cash yield of 7.9 percent. Since December 31, 2011 and once the building held for sale closes, gross proceeds from dispositions will total $211.5 million1 with a projected year-one weighted-average cash yield of 7.1 percent.

The table below represents a summary of the seven assets that closed since September 30, 2012, and the held-for-sale building:

 

Market

   Submarket    Square Feet      Occupancy     Closed  

Atlanta, GA

   Henry County      189,000         100.0     Dec-12   

Columbus, OH

   Southeast      432,000         100.0     Dec-12   

Columbus, OH

   Southeast      388,000         100.0     Dec-12   

Memphis, TN

   Southeast/Shelby      806,000         100.0     Dec-12   

Memphis, TN

   Southeast/Shelby      300,000         100.0     Dec-12   

Atlanta, GA

   Henry County      578,000         76.2     Jan-13   

Memphis, TN

   Southeast/Shelby      1,039,000         74.1     Jan-13   

Memphis, TN

   Southeast/Shelby      400,000         100.0     *   
     

 

 

    

 

 

   

Total/Weighted Average

        4,132,000         90.2  

 

* Building held for sale and scheduled to close in Q1 2013

Capital Markets Activity

During the fourth quarter DCT Industrial raised $59.2 million in net proceeds from the sale of common stock through its “at the market” continuous equity offering. The Company issued approximately 9.5 million shares at an average price of $6.33 per share. The proceeds were used to fund acquisitions.

Dividend

DCT Industrial’s Board of Directors has declared a $0.07 per share quarterly cash dividend, payable on April 17, 2013, to stockholders of record as of April 5, 2013.

Guidance

The Company’s guidance for 2013 FFO is between $0.40 to $0.45 per diluted share. Additionally, net loss attributable to common stockholders is expected to be between $(0.06) and $(0.01) per diluted share.

DCT Industrial’s guidance for 2013 includes the following assumptions:

 

   

Average occupancy for the consolidated operating portfolio will range between 91.0 percent and 94.0 percent

 

   

Same-store net operating income will increase between 1.0 percent and 4.0 percent on a GAAP basis and between 2.0 percent and 5.0 percent on a cash basis

 

   

Development starts of between $125 million and $200 million

 

   

$100 million to $200 million of stabilized and value-add acquisitions

 

1

Includes DCT Industrial’s proportionate share of gross proceeds for properties sold by unconsolidated joint ventures.

 

4


The Company’s FFO guidance excludes real estate gains and losses, impairments and acquisition costs.

Conference Call Information

DCT Industrial will host a conference call to discuss full year and fourth quarter 2012 results on Friday, February 8, 2013 at 11:00 a.m. Eastern Time. Stockholders and interested parties may listen to a live broadcast of the conference call by dialing (888) 317-6016 or (412) 317-6016. A telephone replay will be available until 9 a.m. Eastern Time, Friday, February 22, 2013 and can be accessed by dialing (877) 344-7529 or (412) 317-0088 and entering the passcode 10023617. 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 8, 2014.

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 Inc.®

DCT Industrial Trust Inc. 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. and Mexico. As of December 31, 2012, the Company owned interests in approximately 75.6 million square feet of properties leased to approximately 870 customers, including 14.2 million square feet operated on behalf of four institutional capital management partners. Additional information is available at www.dctindustrial.com.

CONTACT:

Melissa Sachs

DCT Industrial Trust Inc.

303-597-2400

investorrelations@dctindustrial.com

###

 

5


DCT INDUSTRIAL TRUST INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share information)

 

     December 31,     December 31,  
     2012     2011  
     (unaudited)        

ASSETS

    

Land

   $ 780,235      $ 647,552   

Buildings and improvements

     2,481,206        2,393,346   

Intangible lease assets

     78,467        84,779   

Construction in progress

     45,619        35,386   
  

 

 

   

 

 

 

Total investment in properties

     3,385,527        3,161,063   

Less accumulated depreciation and amortization

     (605,888     (589,314
  

 

 

   

 

 

 

Net investment in properties

     2,779,639        2,571,749   

Investments in and advances to unconsolidated joint ventures

     130,974        139,278   
  

 

 

   

 

 

 

Net investment in real estate

     2,910,613        2,711,027   

Cash and cash equivalents

     12,696        12,834   

Restricted cash

     19,379        7,502   

Deferred loan costs, net

     6,838        8,567   

Straight-line rent and other receivables, net of allowance for doubtful accounts of $1,251 and $1,256, respectively

     51,179        42,349   

Other assets, net

     12,945        11,019   

Assets held for sale

     52,852        —     
  

 

 

   

 

 

 

Total assets

   $ 3,066,502      $ 2,793,298   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Liabilities:

    

Accounts payable and accrued expenses

   $ 57,501      $ 45,785   

Distributions payable

     21,129        19,057   

Tenant prepaids and security deposits

     24,395        22,864   

Other liabilities

     7,213        29,797   

Intangible lease liability, net

     20,148        18,897   

Line of credit

     110,000        —     

Senior unsecured notes

     1,025,000        935,000   

Mortgage notes

     326,617        317,783   

Liabilities related to assets held for sale

     940        —     
  

 

 

   

 

 

 

Total liabilities

     1,592,943        1,389,183   
  

 

 

   

 

 

 

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 280,310,488 and 245,943,100 shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively

     2,803        2,459   

Additional paid-in capital

     2,232,682        2,018,075   

Distributions in excess of earnings

     (871,655     (783,229

Accumulated other comprehensive loss

     (34,766     (29,336
  

 

 

   

 

 

 

Total stockholders’ equity

     1,329,064        1,207,969   

Noncontrolling interests

     144,495        196,146   
  

 

 

   

 

 

 

Total equity

     1,473,559        1,404,115   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 3,066,502      $ 2,793,298   
  

 

 

   

 

 

 

 

6


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,
 
     2012     2011     2012     2011  

REVENUES:

        

Rental revenues

   $ 68,504      $ 60,539      $ 256,720      $ 231,463   

Institutional capital management and other fees

     916        1,138        4,059        4,291   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     69,420        61,677        260,779        235,754   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES:

        

Rental expenses

     8,724        7,947        32,736        31,601   

Real estate taxes

     9,330        8,258        38,090        34,069   

Real estate related depreciation and amortization

     30,984        28,454        120,047        113,470   

General and administrative

     6,928        5,460        26,064        25,925   

Casualty gains

     (1,413     (33     (1,554     (33
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     54,553        50,086        215,383        205,032   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     14,867        11,591        45,396        30,722   

OTHER INCOME AND EXPENSE:

        

Development profits, net of tax

     307        —          307        —     

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

     303        894        1,087        (2,556

Impairment losses on investments in unconsolidated joint ventures

     —          (19     —          (1,953

Interest expense

     (17,504     (17,247     (69,274     (63,645

Interest and other income (expense)

     (62     (53     291        (310

Income tax benefit (expense) and other taxes

     (94     (38     (716     (144
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (2,183     (4,872     (22,909     (37,886
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from discontinued operations

     1,554        4,502        6,169        9,043   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income (loss) of DCT Industrial Trust Inc.

     (629     (370     (16,740     (28,843

Net (income) loss attributable to noncontrolling interests

     (216     207        1,654        3,593   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

     (845     (163     (15,086     (25,250
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributed and undistributed earnings allocated to participating securities

     (122     (93     (524     (443
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income (loss) attributable to common stockholders

   $ (967   $ (256   $ (15,610   $ (25,693
  

 

 

   

 

 

   

 

 

   

 

 

 

EARNINGS PER COMMON SHARE – BASIC AND DILUTED:

        

Loss from continuing operations

   $ (0.01   $ (0.02   $ (0.08   $ (0.14

Income (loss) from discontinued operations

     0.01        0.02        0.02        0.03   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common stockholders

   $ (0.00   $ (0.00   $ (0.06   $ (0.11
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

        

Basic and diluted

     271,066        245,939        254,831        242,591   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

7


Reconciliation of Net Income (Loss) Attributable to Common Stockholders to Funds from Operations(1)

(unaudited, in thousands, except per share and unit data)

 

      Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2012     2011     2012     2011  

Net income (loss) attributable to common stockholders

   $ (845   $ (163   $ (15,086   $ (25,250

Adjustments:

        

Real estate related depreciation and amortization

     32,011        32,149        126,687        128,989   

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

     (303     (894     (1,087     2,556   

Equity in FFO of unconsolidated joint ventures

     2,429        2,613        10,312        4,732   

Impairment losses on depreciable real estate

     —          8,226        11,422       10,160   

Gain on dispositions of real estate interests

     (1,035     (12,030     (13,383     (12,030

Noncontrolling interest in the above adjustments

     (2,601     (3,399     (12,522     (14,252

FFO attributable to unitholders

     2,365        2,965        9,743        9,901   
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO basic and diluted

     32,021        29,467        116,086        104,806   
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO attributable to common stockholders and unitholders(1):

        

Adjustments:

        

Acquisition costs(2)

     989        493        1,975        1,902   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 33,010      $ 29,960      $ 118,061      $ 106,708   
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO per common share and unit — basic and diluted

   $ 0.11      $ 0.11      $ 0.41      $ 0.39   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 0.11      $ 0.11      $ 0.42      $ 0.40   
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO weighted average common shares and units outstanding:

        

Common shares for earnings per share—basic

     271,066        245,939        254,831        242,591   

Participating securities

     1,995        1,368        1,896        1,601   

Units

     21,437        25,626        23,358        25,310   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     294,498        272,933        280,085        269,502   

Dilutive common stock equivalents

     662        431        623        449   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     295,160        273,364        280,708        269,951   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Funds from Operations, FFO, as defined by the National Association of Real Estate Investment Trusts (NAREIT).

(2) 

Excluding amounts attributable to noncontrolling interests.

 

8


Guidance

The Company is providing the following guidance:

 

     Range for the Full-Year
2013
 
      Low     High  

Guidance:

    

Earnings per common share—diluted

   $ (0.06   $ (0.01

Impairments and acquisition cost

     0.01        0.01   

Real estate related depreciation and amortization(1)

     0.45        0.45   
  

 

 

   

 

 

 

FFO, as adjusted, per common share and unit-diluted(2)

   $ 0.40      $ 0.45   
  

 

 

   

 

 

 

 

(1) Includes pro rata share of real estate depreciation and amortization from unconsolidated joint ventures.
(2) The Company’s FFO guidance excludes future real estate gains and losses and acquisition costs.

The following table shows the calculation of our Fixed Charge Coverage for the three and twelve months ended

December 31, 2012 and 2011 (in thousands):

 

    

Three Months Ended

December 31,

    Twelve Months Ended
December 31,
 
      2012     2011     2012     2011  

CALCULATION OF ADJUSTED EBITDA(1):

        

Net income (loss) attributable to common stockholders

   $ (845   $ (163   $ (15,086   $ (25,250

Interest expense

     17,504        17,347        69,403        64,254   

Proportionate share of interest expense from unconsolidated joint ventures

     734        722        3,100        3,077   

Real estate related depreciation and amortization

     32,011        32,149        126,687        128,989   

Proportionate share of real estate related depreciation and amortization from unconsolidated joint ventures

     1,689        1,390        7,462        6,177   

Income tax (benefit) expense and other taxes

     94        38        716        144   

Stock-based compensation amortization

     1,235        831        4,313        4,587   

Noncontrolling interests

     216        (207     (1,654     (3,593

Non-FFO gains on dispositions of real estate interests

     (1,035     (12,030     (13,383     (12,030

Impairment losses(2)

     —          8,226        11,422        10,160   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 51,603     $ 48,303     $ 192,980      $ 176,515   
  

 

 

   

 

 

   

 

 

   

 

 

 

CALCULATION OF FIXED CHARGES

        

Interest expense

   $ 17,504      $ 17,347      $ 69,403      $ 64,254   

Capitalized interest

     1,684        537        4,267        2,670   

Amortization of loan costs and debt premium/discount

     (284     (277     (1,093     (1,015

Other noncash interest expense

     (1,008     (251     (2,034     (970

Proportionate share of interest expense from unconsolidated joint ventures

     734        722        3,100        3,077   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

   $ 18,630     $ 18,078     $ 73,643      $ 68,016   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fixed charge coverage

     2.8        2.7        2.6        2.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Includes amounts related to discontinued operations, when applicable.

(2) 

Includes impairment losses on investments in unconsolidated joint ventures.

 

9


The following table is a reconciliation of our reported “Loss from continuing operations” to our net operating income for the three and twelve months ended December 31, 2012 and 2011 (in thousands):

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
      2012     2011     2012     2011  

Reconciliation of loss from continuing operations to NOI:

        

Loss from continuing operations

   $ (2,183   $ (4,872   $ (22,909   $ (37,886

Income tax expense (benefit) and other taxes

     94        38        716        144   

Interest and other (income) expense

     62        53        (291     310   

Interest expense

     17,504        17,247        69,274        63,645   

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

     (303     (894     (1,087     2,556   

General and administrative

     6,928        5,460        26,064        25,925   

Real estate related depreciation and amortization

     30,984        28,454        120,047        113,470   

Impairment losses on investments in unconsolidated joint ventures

     —          19        —          1,953   

Development profits, net of tax

     (307     —          (307     —     

Casualty gains

     (1,413     (33     (1,554     (33

Institutional capital management and other fees

     (916     (1,138     (4,059     (4,291
  

 

 

   

 

 

   

 

 

   

 

 

 

Total GAAP net operating income

     50,450        44,334        185,894        165,793   

Less net operating (income) loss—non-same store properties

     (4,471     (397     (22,493     (6,719
  

 

 

   

 

 

   

 

 

   

 

 

 

Same store GAAP net operating income

     45,979        43,937        163,401        159,074   

Less revenue from lease terminations

     (94     (179     (462     (608
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     45,885        43,758        162,939        158,466   

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

     (997     (2,435     (3,066     (7,217

Less amortization of above/(below) market rents

     (225     (201     (473     (481
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 44,663      $ 41,122      $ 159,400      $ 150,768   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

10


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 measureable 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 severance, acquisition costs, debt modification costs and impairment losses on properties which are not depreciable. We believe that FFO excluding severance, 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 loss attributable to DCT common stockholders before interest, taxes, depreciation, amortization, stock-based compensation expense, noncontrolling interest, impairment losses 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.

 

11


Forward-Looking Statements

We make statements in this document 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. 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 impact of the economic downturn and the strength of the economic recovery and the potential impact of the financial crisis in Europe; 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 developments; 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 costs 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.

 

12