DC Industrial Liquidating Trust - FORM 8-K - EX-99.1

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8-K - 8-K - DC Industrial Liquidating Trust	d929834d8k.htm

Exhibit 99.1

LOGO

Table of Contents

The following supplements Industrial Income Trust Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission (the “SEC”) on May 13, 2015, which is available at www.industrialincome.com. As used herein, the terms “IIT,” the “Company,” “we,” “our,” or “us” refer to Industrial Income Trust Inc.


Overview			2

Quarterly Highlights			3

Consolidated Statements of Operations			4

Consolidated Balance Sheets			5

Consolidated Statements of Cash Flows			6

Funds from Operations			7

Selected Financial Data			8

Portfolio Overview			9

Lease Expirations & Top Customers			11

Development Overview			12

Debt			13

Definitions			14

This supplemental information contains forward-looking statements that are based on IIT’s current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties, including, without limitation, the failure of acquisitions to perform as IIT expects, IIT’s ability to successfully integrate acquired properties and operations and otherwise execute on its investment strategy, the availability of affordable financing, the availability of cash flows from operating activities for distributions and capital expenditures and those risks set forth in the “Risk Factors” section of IIT’s Annual Report on Form 10-K for the year ended December 31, 2014, as amended or supplemented by the Company’s other filings with the SEC. Any of these statements could prove to be inaccurate, and actual events or IIT’s investments and results of operations could differ materially from those expressed or implied. To the extent that IIT’s assumptions differ from actual results, IIT’s ability to meet such forward-looking statements, including its ability to consummate additional acquisitions and financings, to invest in a diversified portfolio of quality real estate investments, and to generate attractive returns for investors, may be significantly hindered. You are cautioned not to place undue reliance on any forward-looking statements. IIT cannot assure you that it will attain its investment objectives.

The large photo on the cover page is of Ontario Mills Distribution Center, which consists of one building totaling 520,000 square feet located in the Southern California market, is 100% leased to one customer.

First Quarter 2015

Supplemental Reporting Package

Page 1

Overview

IIT is a leading, national industrial real estate investment trust that selectively acquires, develops, and operates high-quality distribution warehouses located in key U.S. logistics centers serving corporate customers. IIT’s core strategy has been to build a national platform of institutional quality industrial properties by targeting markets that have high barriers to entry, proximity to a large demographic base, and/or access to major distribution infrastructure. IIT acquired its first building in June 2010.

As of March 31, 2015, we owned and managed a consolidated real estate portfolio that included 284 industrial buildings totaling approximately 57.8 million square feet located in 19 markets throughout the U.S. with 550 customers having a weighted-average remaining lease term (based on square feet) of 5.3 years. Of the 284 industrial buildings we owned and managed as of March 31, 2015:

•

280 industrial buildings totaling approximately 56.3 million square feet comprised our operating portfolio, which was 92% occupied (93% leased).

•

Four industrial buildings totaling approximately 1.5 million square feet comprised our development and value-add portfolio.

As of March 31, 2015, we had six buildings under construction totaling approximately 0.8 million square feet and one building in the pre-construction phase with an additional 0.2 million square feet.

LOGO

Public Earnings Call

We will host a public conference call on Thursday, May 28, 2015 to review quarterly operating and financial results for the quarter ended March 31, 2015. Dwight Merriman, Chief Executive Officer, and Tom McGonagle, Chief Financial Officer, will present operating and financial data and discuss the Company’s corporate strategy and development activity. The conference call will take place at 2:15 p.m. MDT and can be accessed by dialing (877) 742-5590; conference ID 33754143. To access a replay of the call, contact Dividend Capital at (866) 324-7348.

Contact Information

Industrial Income Trust Inc.

518 Seventeenth Street, 17th Floor

Denver, Colorado 80202

Telephone: (303) 228-2200

Attn: Thomas G. McGonagle, Chief Financial Officer

⁽¹⁾	See “Definitions” for a description of certain terms used in this supplemental package.

First Quarter 2015

Supplemental Reporting Package

Page 2

Quarterly Highlights

The following is an overview of our operating and financial results for the quarter ended March 31, 2015:

•

As of March 31, 2015, we had 284 consolidated buildings aggregating 57.8 million square feet as compared to 297 consolidated buildings aggregating 57.6 million square feet as of March 31, 2014.

•

As of March 31, 2015, we had six buildings (four located in the South Florida market and two located in the Pennsylvania market) under construction totaling approximately 0.8 million square feet and one building (located in the Pennsylvania market) in the pre-construction phase with an additional 0.2 million square feet.

•

During the quarter ended March 31, 2015, we completed construction of one building located in the Baltimore / D.C. market with 0.2 million of rentable square feet.

•

As of March 31, 2015, our aggregate gross investment in properties was approximately $3.9 billion.

•

During the quarter ended March 31, 2015, we leased approximately 2.5 million square feet, which included 0.4 million square feet of new leases and expansions, and 2.1 million square feet of renewals and future leases. Future leases represent new leases for units that are entered into while the units are occupied by the current customer.

•

Our net operating income⁽¹⁾ was $59.1 million for the quarter ended March 31, 2015, an increase of 1.3% as compared to net operating income of $58.3 million for the same period in 2014. Excluding 20 properties disposed of in April 2014, our net operating income increased approximately $3.3 million or 5.9%, as compared to the same period in 2014.

•

Our same store net operating income⁽¹⁾ was $56.2 million for the quarter ended March 31, 2015, an increase of 1.5% over same store net operating income of $55.3 million for the same period in 2014.

•

We had Company-defined Funds from Operations (“Company-Defined FFO”)⁽²⁾ of $31.7 million, or $0.15 per share, for the quarter ended March 31, 2015, as compared to $33.4 million, or $0.16 per share, for the same period in 2014.

•

Our net loss was $1.5 million, or $0.01 per share, for the quarter ended March 31, 2015, as compared to net loss of $4.8 million, or $0.02 per share, for the same period in 2014. These results include non-recurring acquisition and strategic transaction expenses of $0.5 million for both quarters ended March 31, 2015 and 2014.

⁽¹⁾	See “Selected Financial Data” for additional information regarding net operating income and same store net operating income, as well as “Definitions” for a reconciliation of net operating income to generally accepted accounting principles (“GAAP”) net loss.

⁽²⁾	See “Funds from Operations” for a reconciliation of GAAP net loss to Company-defined FFO, as well as “Definitions” for additional information.

First Quarter 2015

Supplemental Reporting Package

Page 3

Consolidated Statements of Operations


	For the Quarter Ended March 31,
(in thousands, except per share data)	2015			2014
Revenues:
Rental revenues	$	82,722		$	81,537

Total revenues		82,722			81,537


Operating expenses:
Rental expenses		23,650			23,245
Real estate-related depreciation and amortization		32,546			37,616
General and administrative expenses		2,074			1,798
Asset management fees, related party		7,565			7,322
Acquisition expenses, related party		—			199
Acquisition and strategic transaction expenses		510			354

Total operating expenses		66,345			70,534


Operating income		16,377			11,003
Other expenses:

Equity in loss of unconsolidated joint ventures		337			21
Interest expense and other		17,530			15,797

Total other expenses		17,867			15,818

Net loss		(1,490	)		(4,815	)
Net loss attributable to noncontrolling interests		—			—

Net loss attributable to common stockholders	$	(1,490	)	$	(4,815	)


Weighted-average shares outstanding		213,130			208,135

Net loss per common share - basic and diluted	$	(0.01	)	$	(0.02	)

First Quarter 2015

Supplemental Reporting Package

Page 4

Consolidated Balance Sheets


(in thousands)	March 31, 2015		December 31, 2014

ASSETS
Net investment in real estate properties	$	3,502,953	$	3,519,151
Investment in unconsolidated joint ventures		8,027		8,208
Cash and cash equivalents		3,663		8,053
Restricted cash		5,678		5,941
Straight-line rent receivable		45,886		42,759
Tenant receivables, net		3,638		3,278
Notes receivable		3,612		3,612
Deferred financing costs, net		8,343		9,094
Deferred acquisition costs		20,493		20,492
Other assets		5,328		7,062

Total assets	$	3,607,621	$	3,627,650


LIABILITIES AND EQUITY
Accounts payable and accrued expenses	$	26,597	$	26,873
Tenant prepaids and security deposits		37,744		41,108
Accrued capital		3,952		8,460
Intangible lease liability, net		24,604		25,865
Debt		1,998,567		1,978,625
Distributions payable		33,301		33,072
Other liabilities		8,585		4,701

Total liabilities		2,133,350		2,118,704

Total stockholders’ equity		1,474,270		1,508,945
Noncontrolling interests		1		1

Total liabilities and equity	$	3,607,621	$	3,627,650


Shares outstanding		212,058		211,573

First Quarter 2015

Supplemental Reporting Package

Page 5

Consolidated Statements of Cash Flows


	For the Quarter Ended March 31,
($ in thousands)	2015			2014
Operating activities:
Net loss	$	(1,490	)	$	(4,815	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Real estate-related depreciation and amortization		32,546			37,616
Equity in loss of unconsolidated joint ventures		337			21
Straight-line rent and amortization of above- and below-market leases		(2,896	)		(3,604	)
Other		681			465
Changes in operating assets and liabilities		(2,012	)		(9,673	)

Net cash provided by operating activities		27,166			20,010


Investing activities:
Real estate acquisitions		—			(14,498	)
Acquisition deposits		—			(8,743	)
Capital expenditures and development activities		(22,350	)		(21,048	)
Investment in unconsolidated joint ventures		(156	)		—
Other		—			(23	)

Net cash used in investing activities		(22,506	)		(44,312	)


Financing activities:
Repayments of mortgage notes		(14,640	)		(1,547	)
Proceeds from lines of credit		45,000			40,000
Repayments of lines of credit		(10,000	)		—
Distributions paid to common stockholders		(16,758	)		(16,199	)
Redemptions of common stock		(12,512	)		—
Other		(140	)		(525	)

Net cash (used in) provided by financing activities		(9,050	)		21,729


Net decrease in cash and cash equivalents		(4,390	)		(2,573	)
Cash and cash equivalents, at beginning of period		8,053			18,358

Cash and cash equivalents, at end of period	$	3,663		$	15,785

First Quarter 2015

Supplemental Reporting Package

Page 6

Funds from Operations ⁽¹⁾

Our first quarter 2015 Company-defined FFO was $0.15 per share, as compared to $0.16 per share for the first quarter 2014. There can be no assurances that the current level of Company-defined FFO will be maintained.


	For the Quarter Ended March 31,
(in thousands, except per share data)	2015			2014
Net loss	$	(1,490	)	$	(4,815	)

Net loss per common share	$	(0.01	)	$	(0.02	)

Reconciliation of net loss to FFO:
Net loss	$	(1,490	)	$	(4,815	)
Add (deduct) NAREIT-defined adjustments:
Real estate-related depreciation and amortization		32,546			37,616
Real estate-related depreciation and amortization of unconsolidated joint ventures		100			9

FFO	$	31,156		$	32,810

FFO per common share	$	0.15		$	0.16

Reconciliation of FFO to Company-defined FFO:
FFO	$	31,156		$	32,810
Add (deduct) Company-defined adjustments:
Acquisition and strategic transaction costs		510			553

Company-defined FFO	$	31,666		$	33,363

Company-defined FFO per common share	$	0.15		$	0.16

Weighted-average shares outstanding		213,130			208,135

⁽¹⁾	See “Definitions” for additional information regarding Funds from Operations (“FFO”) and Company-defined FFO.

First Quarter 2015

Supplemental Reporting Package

Page 7

Selected Financial Data

The following table presents selected consolidated financial information, which has been derived from our consolidated financial statements. The information presented below is only a summary and does not provide all of the information contained in our historical consolidated financial statements, including the related notes thereto, and as such, you should read it in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. The same store operating portfolio for the three months ended March 31, 2015 and 2014 included 265 buildings owned as of January 1, 2014, which represented 92% of total rentable square feet or 94% of total revenues as of March 31, 2015.


	For the Quarter Ended March 31,
($ in thousands, except per share data)	2015			2014
Operating data:
Rental revenues from same store operating properties⁽¹⁾	$	78,082		$	77,272
Rental revenues from other properties⁽¹⁾		4,640			4,265

Total rental revenues		82,722			81,537

Rental expenses from same store operating properties⁽¹⁾		21,913			21,933
Rental expenses from other properties⁽¹⁾		1,737			1,312

Total rental expenses		23,650			23,245

NOI from same store operating properties		56,169			55,339
NOI from other properties		2,903			2,953

Total NOI⁽²⁾	$	59,072		$	58,292

Less straight-line rents	$	(3,127	)	$	(5,025	)
Plus amortization of above market leases, net		231			1,421

Cash NOI⁽²⁾	$	56,176		$	54,688

Distributions:
Total distributions declared	$	33,301		$	32,515
Distributions declared per common share	$	0.15625		$	0.15625
Cash flow data:
Net cash provided by operating activities	$	27,166		$	20,010
Net cash used in by investing activities	$	(22,506	)	$	(44,312	)
Net cash (used in) provided by financing activities	$	(9,050	)	$	21,729
Capital expenditures:
Development activity	$	10,492		$	12,074
Tenant improvements and leasing commissions		10,400			7,618
Property maintenance and improvements		1,458			1,356

Total capital expenditures	$	22,350		$	21,048

⁽¹⁾	See “Definitions” for additional information regarding “same store operating properties” and “other properties.”

⁽²⁾	See “Definitions” for a reconciliation of net operating income to GAAP net loss and for a reconciliation of cash net operating income to GAAP net loss.

First Quarter 2015

Supplemental Reporting Package

Page 8

Portfolio Overview

Our portfolio consists primarily of institutional quality, functional industrial buildings with generic features designed for operating flexibility and for high acceptance by a wide range of customers. As of March 31, 2015, the weighted-average age of our buildings (based on square feet) was 14.0 years.

Portfolio Data


	As of
(square feet in thousands)	March 31, 2015			December 31, 2014			March 31, 2014
Number of consolidated buildings		284			283			297
Number of unconsolidated buildings		2			2			2

Total number of buildings		286			285			299

Rentable square feet of consolidated buildings		57,832			57,640			57,558
Rentable square feet of unconsolidated buildings		710			710			710

Total rentable square feet		58,542			58,350			58,268

Total number of customers⁽¹⁾		550			551			548

Percent occupied of operating portfolio⁽¹⁾		92	%		91	%		94	%
Percent occupied of total portfolio⁽¹⁾		90	%		88	%		92	%

Percent leased of operating portfolio⁽¹⁾		93	%		93	%		94	%
Percent leased of total portfolio⁽¹⁾		91	%		90	%		92	%

Markets by Total Rentable Square Feet

as of March 31, 2015

LOGO

⁽¹⁾	Represents our consolidated portfolio.

First Quarter 2015

Supplemental Reporting Package

Page 9

Portfolio Overview

As of March 31, 2015, we owned and managed a well-diversified industrial portfolio located in 19 major industrial markets throughout the U.S. Approximately 73% (based on both square feet and annual base rent) of our total portfolio was located in our top-tier markets⁽¹⁾.


($ and square feet in thousands)	Number of Buildings		Rentable Square Feet		Occupied Rate		Leased Rate		Annualized Base Rent		Percent of Total Annualized Base Rent
Operating Properties:
Atlanta		19		4,905		89.1%		89.3%	$	15,064		6.2%
Austin		7		748		100.0		100.0		4,670		1.9
Baltimore / D.C.		25		4,999		94.4		94.4		24,330		10.0
Chicago		19		3,967		99.6		99.6		17,040		7.0
Dallas		23		3,218		94.2		98.9		14,142		5.8
Denver		1		554		100.0		100.0		3,348		1.4
Houston		29		3,217		81.2		88.2		13,696		5.6
Indianapolis		7		2,698		84.7		84.7		10,961		4.5
Memphis		6		2,176		98.5		98.5		5,942		2.4
Nashville		6		2,531		100.0		100.0		9,155		3.7
New Jersey		17		2,728		85.9		86.4		13,571		5.6
Pennsylvania		29		5,248		97.8		97.8		23,458		9.6
Phoenix		17		4,646		83.2		83.2		21,121		8.7
Portland		8		948		90.5		90.5		4,027		1.6
Salt Lake City		4		1,140		100.0		100.0		5,622		2.3
San Francisco Bay Area		8		1,171		100.0		100.0		7,030		2.9
Seattle / Tacoma		10		1,950		97.2		99.0		10,215		4.2
South Florida		21		1,793		96.1		96.1		12,218		5.0
Southern California		24		7,633		88.1		88.1		28,326		11.6

Total Operating		280		56,270		92.1		92.8		243,936		100.0

Development and Value-Add Properties:
Baltimore / D.C.		1		192		—		—		—		—
Houston		1		123		—		—		—		—
Salt Lake City		1		416		54.7		54.7		—		—
Southern California		1		831		—		—		—		—

Total Development and Value-Add		4		1,562		14.6		14.6		—		—

Total Portfolio		284		57,832		90.0%		90.7%	$	243,936		100.0%

⁽¹⁾	Our top-tier markets include: Atlanta, Baltimore / D.C., Chicago, Dallas, Houston, New Jersey, Pennsylvania, San Francisco Bay Area, Seattle / Tacoma, South Florida and Southern California.

First Quarter 2015

Supplemental Reporting Package

Page 10

Lease Expirations & Top Customers

As of March 31, 2015, our consolidated real estate portfolio consisted of 284 industrial buildings occupied by 550 customers with 595 leases and a weighted-average remaining lease term based on square feet of 5.3 years, or 5.1 years based on annual base rent.

Lease Expirations

During the first quarter of 2015, we leased approximately 2.5 million square feet, which included 0.4 million square feet of new leases and expansions, and 2.1 million square feet of renewals and future leases. Future leases represent new leases for units that are entered into while the units are occupied by the current customer. Approximately 70% of our total occupied square feet is scheduled to expire in 2018 or later.


($ and square feet in thousands)	Number of Leases		Occupied Square Feet		Percent of Total Occupied Square Feet		Annualized Base Rent		Percent of Total Annualized Base Rent
Remainder of 2015⁽¹⁾		72		3,630		7.0%	$	18,771		7.7%
2016		105		6,022		11.6		29,017		11.9
2017		113		5,805		11.2		27,934		11.5
2018		87		8,892		17.1		39,735		16.3
2019		67		5,956		11.4		30,730		12.6
2020		48		3,860		7.4		19,036		7.8
2021		24		3,194		6.1		18,070		7.4
2022		27		4,636		8.9		20,555		8.4
2023		12		1,226		2.4		5,325		2.2
2024		19		3,111		6.0		12,230		5.0
Thereafter		21		5,695		10.9		22,533		9.2

Total occupied		595		52,027		100.0%	$	243,936		100.0%

Customers

Of the 550 customers as of March 31, 2015, there were no customers that individually represented more than 6% of total annualized base rent or total occupied square feet, and only one customer, Amazon.com, LLC, above 5% of total annualized base rent. The following table reflects our 10 largest customers, based on annualized base rent, which occupied a combined 11.6 million square feet as of March 31, 2015:


Customer	Percent of Total Annualized Base Rent		Percent of Total Occupied Square Feet
Amazon.com, LLC		5.7%		4.8%
Home Depot USA INC.		3.5		3.7
Hanesbrands, Inc.		2.5		2.5
Belkin International		2.3		1.5
CEVA Logistics U.S.		2.2		2.8
Harbor Freight Tools		2.0		2.4
GlaxoSmithKlein		1.4		1.2
U.S. Government		1.4		1.0
United Natural Foods, Inc.		1.4		1.1
Samsung Electronics		1.2		1.2

Total		23.6%		22.2%

⁽¹⁾	Includes month-to-month leases.

First Quarter 2015

Supplemental Reporting Package

Page 11

Development Overview

The following summarizes our development and value-add portfolio and projects under development as of March 31, 2015:


($ and square feet in thousands)	Market	Number of Buildings	Rentable Square Feet⁽¹⁾		Percent Owned		Cumulative Costs Incurred⁽²⁾		Total Projected Investment		Completion Date⁽³⁾	Percent Occupied		Percent Leased

Development and Value-Add Portfolio⁽⁴⁾
Westport DC Bldg C	Salt Lake City	1		416		100%	$	24,092	$	25,709	Q2-2014		55%		55%
Beltway Crossing Bldg 6	Houston	1		123		100%		7,847		8,845	Q2-2014		— %		— %
Cajon DC	So. California	1		831		100%		57,272		62,956	Q3-2014		— %		— %
Franklin Square II	Baltimore / D.C.	1		192		100%		11,333		13,608	Q1-2015		— %		— %

Total Development and Value-Add		4		1,562		100%	$	100,544	$	111,118			15%		15%


Projects Under Development
*Under Construction*
Tamarac II	South Florida	1		104		100%	$	6,233	$	11,707	Q2-2015				26%
Tamarac III	South Florida	1		42		100%		3,335		5,018	Q2-2015				— %
Miami III	South Florida	1		102		100%		4,524		9,231	Q3-2015				— %
Miami IV	South Florida	1		88		100%		4,734		8,262	Q3-2015				— %
Leigh Valley III	Pennsylvania	1		106		100%		2,056		9,388	Q4-2015				— %
Lehigh Valley I	Pennsylvania	1		400		100%		5,089		25,544	Q4-2015				— %

Total Under Construction		6		842		100%		25,971		69,150					3%


*Pre-Construction*
Lehigh Valley II	Pennsylvania	1		210		100%		1,233		13,585	Q1-2016				— %

Total Pre-Construction		1		210		100%		1,233		13,585					— %

Total Projects Under Development		7		1,052		100%	$	27,204	$	82,735					3%


Development Properties Transferred to Operating Portfolio During the Period
Imperial DC	Houston	1		328		100%	$	20,365	$	20,365	Q1-2014		— %		— %
Beltway Crossing Bldg 5	Houston	1		86		100%		6,291		6,291	Q2-2014		100%		100%

		2		414		100%	$	26,656	$	26,656			21%		21%

⁽¹⁾	Rentable square feet for pre-construction projects is projected and cannot be assured.

⁽²⁾	As of March 31, 2015.

⁽³⁾	The completion date represents the acquisition date, date of building shell completion, or estimated date of shell completion.

⁽⁴⁾

The development and value-add portfolio includes buildings acquired with the intention to reposition or redevelop, or buildings recently completed which have not yet reached stabilization. We generally consider a building to be stabilized on the earlier to occur of the first anniversary of a building’s shell completion or a building achieving 90% occupancy.

First Quarter 2015

Supplemental Reporting Package

Page 12

Debt

Summary of Consolidated Debt

As of March 31, 2015, we had approximately $2.0 billion of consolidated indebtedness, which was comprised of borrowings under our lines of credit and unsecured term loans, and our mortgage note financings. Our consolidated debt had a weighted-average remaining term of approximately 4.4 years. Approximately 81% of our total debt was fixed and 19% of our total debt was variable as of March 31, 2015. The following is a summary of our consolidated debt as of March 31, 2015:


($ in thousands)	Weighted-Average Stated Interest Rate as of March 31, 2015		Maturity Date	Balance as of March 31, 2015
Lines of credit		2.20%	August 2015 - January 2017	$	378,000
Term loans		3.34%	January 2018 - January 2019		500,000
Fixed-rate mortgage notes		4.24%	September 2015 - November 2024		1,120,567

Total / weighted-average consolidated debt		3.63%		$	1,998,567

Fixed-rate debt		3.96%			81%
Variable-rate debt		2.20%			19%

Total / weighted-average		3.63%			100%

Scheduled Principal Payments of Debt

As of March 31, 2015, the principal payments due on our consolidated debt during each of the next five years and thereafter were as follows:


($ in thousands)	Lines of Credit		Term Loans		Mortgage Notes		Total
Remainder of 2015⁽¹⁾	$	303,000	$	—	$	38,889	$	341,889
2016		—		—		20,602		20,602
2017⁽¹⁾		75,000		—		62,757		137,757
2018		—		200,000		167,684		367,684
2019		—		300,000		71,475		371,475
Thereafter		—		—		755,076		755,076

Total principal payments		378,000		500,000		1,116,483		1,994,483
Unamortized premium on assumed debt		—		—		4,084		4,084

Total	$	378,000	$	500,000	$	1,120,567	$	1,998,567

⁽¹⁾	The lines of credit may be extended pursuant to two one-year extension options, subject to certain conditions. We anticipate meeting the conditions to extend the unsecured line of credit in August 2015, although there can be no assurance that it will be extended.

First Quarter 2015

Supplemental Reporting Package

Page 13

Definitions

Annualized Base Rent. Annualized base rent is calculated as monthly base rent including the impact of any contractual tenant concessions (cash basis) per the terms of a lease as of March 31, 2015, multiplied by 12.

Consolidated Portfolio. The consolidated portfolio excludes properties owned through our unconsolidated joint ventures.

Development and Value-Add Portfolio. The development and value-add portfolio includes buildings acquired with the intention to reposition or redevelop, or buildings recently completed which have not yet reached stabilization. We generally consider a building to be stabilized on the earlier to occur of the first anniversary of a building’s shell completion or a building achieving 90% occupancy.

Funds from Operations (“FFO”) and Company-Defined FFO. We believe that FFO and Company-defined FFO, in addition to net income (loss) and cash flows from operating activities as defined by GAAP, are useful supplemental performance measures that our management uses to evaluate our consolidated operating performance. However, these supplemental, non-GAAP measures should not be considered as an alternative to net income (loss) or to cash flows from operating activities as an indication of our performance and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. No single measure can provide users of financial information with sufficient information and only our disclosures read as a whole can be relied upon to adequately portray our financial position, liquidity, and results of operations. In addition, other REITs may define FFO and similar measures differently and choose to treat acquisition and strategic transaction costs and potentially other accounting line items in a manner different from us due to specific differences in investment and operating strategy or for other reasons.

FFO. As defined by the National Association of Real Estate Investment Trusts (“NAREIT”), FFO is a non-GAAP measure that excludes certain items such as real estate-related depreciation and amortization and gains or losses on sales of assets. We believe FFO is a meaningful supplemental measure of our operating performance that is useful to investors because depreciation and amortization in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. In addition, FFO adjusts for non-recurring gains or losses on the acquisition of certain joint venture properties. We use FFO as an indication of our consolidated operating performance and as a guide to making decisions about future investments.

Company-defined FFO. Similar to FFO, Company-defined FFO is a non-GAAP measure that excludes real estate-related depreciation and amortization and gains or losses on sales of assets, and also excludes acquisition costs (including acquisition fees paid to the Advisor) and strategic transaction costs, each of which are characterized as expenses in determining net loss under GAAP. We believe it is appropriate to adjust our Company-defined FFO for these items as they are driven by transactional activity and factors relating to the financial and real estate markets, rather than factors specific to the on-going operating performance of our properties or investments. Acquisition and strategic transaction costs are paid in cash out of operational cash flow, additional debt, net proceeds from the sale of properties, or ancillary cash flows, and, as a result, such costs negatively impact our operating performance and cash flows from operating activities during the period they are incurred. As such, Company-defined FFO may not be a complete indicator of our operating performance, especially during periods in which properties are being acquired or strategic transaction costs are being incurred, and may not be a useful measure of the long-term operating performance of our properties if we do not continue to operate our business plan as disclosed.

Management does not include historical acquisition costs and strategic transaction costs in its evaluation of future operating performance, as such costs are driven by transactional activity. We use Company-defined FFO to, among other things: (i) evaluate and compare the potential performance of the portfolio after the acquisition phase is complete, and (ii) evaluate potential performance to determine liquidity event strategies. We believe Company-defined FFO facilitates a comparison to other REITs that are not engaged in significant acquisition activity and have similar operating characteristics as us. We believe investors are best served if the information that is made available to them allows them to align their analyses and evaluation with the same performance metrics used by management in planning and executing our business strategy. We believe that these performance metrics will assist investors in evaluating the potential performance of the portfolio. However, these supplemental, non-GAAP measures are not necessarily indicative of future performance and should not be considered as an alternative to net income (loss) or to cash flows from operating activities and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, NAREIT, nor any regulatory body has passed judgment on the acceptability of the adjustments used to calculate Company-defined FFO. In the future, the SEC, NAREIT, or a regulatory body may decide to standardize the allowable adjustments across the non-traded REIT industry at which point we may adjust our calculation and characterization of Company-defined FFO.

First Quarter 2015

Supplemental Reporting Package

Page 14

Definitions

GAAP. Generally accepted accounting principles used in the United States.

Net Operating Income (“NOI”) and Cash NOI. We define (i) NOI as GAAP rental revenues less GAAP rental expenses and (ii) cash NOI as NOI (as previously defined), excluding non-cash amounts recorded for straight-line rents and the amortization of above and below market leases. We consider NOI and cash NOI to be appropriate supplemental performance measures. We believe NOI and cash NOI provide useful information to our investors regarding our financial condition and results of operations because NOI and cash NOI reflect the operating performance of our properties and exclude certain items that are not considered to be controllable in connection with the management of the properties, such as real estate-related depreciation and amortization, acquisition-related expenses, general and administrative expenses, and interest expense. However, NOI and cash NOI should not be viewed as alternative measures of our financial performance since NOI and cash NOI excludes such expenses, which could materially impact our results of operations. Further, our NOI and cash NOI may not be comparable to that of other real estate companies as they may use different methodologies for calculating NOI and cash NOI. Therefore, we believe net income (loss), as defined by GAAP, to be the most appropriate GAAP measure to evaluate our overall performance. Refer to the reconciliation below of our GAAP net income (loss) to NOI and cash NOI.


	For the Quarter Ended March 31,
($ in thousands)	2015			2014
GAAP net loss	$	(1,490	)	$	(4,815	)
Real estate-related depreciation and amortization		32,546			37,616
General and administrative expenses		2,074			1,798
Asset management fees		7,565			7,322
Acquisition and strategic transaction costs		510			553
Other expenses		17,867			15,818

NOI	$	59,072		$	58,292

Straight-line rents		(3,127	)		(5,025	)
Amortization of above market leases, net		231			1,421

Cash NOI	$	56,176		$	54,688

Occupied Rate / Leased Rate. The occupied rate reflects the square footage with a paying customer in place. The leased rate includes the occupied square footage and additional square footage with leases in place that have not yet commenced.

Operating Portfolio. The operating portfolio includes stabilized properties.

Same Store Operating Properties. The same store portfolio includes operating properties owned for the entirety of both the current year period and prior year period for which the operations have been stabilized. Properties that do not meet the same store criteria are included in “other properties” in “Selected Financial Data” above. The same store operating portfolio for the three months ended March 31, 2015 and 2014 included 265 buildings owned as of January 1, 2014, which represented 92% of rentable square feet or 94% of total revenues as of March 31, 2015.

First Quarter 2015

Supplemental Reporting Package

Page 15

DC Industrial Liquidating Trust - FORM 8-K - EX-99.1 - May 20, 2015

Attached files

DC Industrial Liquidating Trust Reports