Industrial Income Trust 10-Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number: 000-54372

Industrial Income Trust Inc.

(Exact Name of Registrant as Specified in its Charter)

Maryland	27-0477259
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

518 Seventeenth Street, 17th Floor Denver, CO	80202
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (303) 228-2200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 6, 2013, there were 206,981,827 shares of the registrant’s common stock outstanding.

INDUSTRIAL INCOME TRUST INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012		3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September  30, 2013 and 2012 (unaudited)		4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2013 and 2012 (unaudited)		5
	Condensed Consolidated Statement of Equity for the Nine Months Ended September 30, 2013 (unaudited)		6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September  30, 2013 and 2012 (unaudited)		7
	Notes to Condensed Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		34
PART II. OTHER INFORMATION
Item 1A.	Risk Factors		35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 6.	Exhibits		36

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INDUSTRIAL INCOME TRUST INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)	September 30, 2013			December 31, 2012
	(unaudited)
ASSETS
Net investment in real estate properties	$	3,450,750		$	2,122,941
Investment in unconsolidated joint ventures		8,136			96,490
Cash and cash equivalents		27,651			24,550
Restricted cash		2,630			1,926
Straight-line and tenant receivables, net of allowances of $998 and $180, respectively		28,481			14,462
Notes receivable		3,612			5,912
Other assets		59,183			28,667
Total assets	$	3,580,443		$	2,294,948
LIABILITIES AND EQUITY
Liabilities
Accounts payable and accrued expenses	$	36,013		$	13,514
Debt		1,826,283			1,195,218
Due to affiliates		62			3,945
Distributions payable		31,725			19,568
Other liabilities		72,729			36,622
Total liabilities		1,966,812			1,268,867
Commitments and contingencies (Note 10)
Equity
Stockholders’ equity:
Preferred stock, $0.01 par value - 200,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.01 par value - 1,000,000 shares authorized, 205,380 and 132,424 shares issued and outstanding, respectively		2,054			1,324
Additional paid-in capital		1,861,436			1,184,906
Accumulated deficit		(250,679	)		(159,894	)
Accumulated other comprehensive income (loss)		819			(256	)
Total stockholders’ equity		1,613,630			1,026,080
Noncontrolling interests		1			1
Total equity		1,613,631			1,026,081
Total liabilities and equity	$	3,580,443		$	2,294,948

See accompanying Notes to Condensed Consolidated Financial Statements.

3

INDUSTRIAL INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands, except per share data)	2013			2012			2013			2012
Revenues:
Rental revenues	$	65,098		$	34,925		$	171,654		$	85,622
Total revenues		65,098			34,925			171,654			85,622
Operating expenses:
Rental expenses		16,843			8,434			43,641			20,537
Real estate-related depreciation and amortization		31,025			16,446			84,909			40,547
General and administrative expenses		1,661			1,327			5,114			4,166
Asset management fees, related party		6,077			3,214			15,831			7,977
Acquisition-related expenses, related party		5,627			2,510			10,961			7,322
Acquisition-related expenses		4,347			2,323			12,315			6,039
Total operating expenses		65,580			34,254			172,771			86,588
Operating income (loss)		(482	)		671			(1,117	)		(966	)
Other income (expenses):
Equity in loss of unconsolidated joint ventures		(1,349	)		(491	)		(2,805	)		(1,911	)
Interest expense and other		(12,488	)		(8,031	)		(35,526	)		(19,769	)
Loss on early extinguishment of debt		—			(874	)		—			(874	)
Gain on acquisition of joint venture		26,481			—			26,481			—
Incentive fee from acquisition of joint venture		1,985			—			1,985			—
Total other income (expenses)		14,629			(9,396	)		(9,865	)		(22,554	)
Net income (loss)		14,147			(8,725	)		(10,982	)		(23,520	)
Net income (loss) attributable to noncontrolling interests		—			—			—			—
Net income (loss) attributable to common stockholders	$	14,147		$	(8,725	)	$	(10,982	)	$	(23,520	)
Weighted-average shares outstanding		203,024			111,996			170,474			94,484
Net income (loss) per common share - basic and diluted	$	0.07		$	(0.08	)	$	(0.06	)	$	(0.25	)

See accompanying Notes to Condensed Consolidated Financial Statements.

4

INDUSTRIAL INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)	2013			2012			2013			2012
Net income (loss) attributable to common stockholders	$	14,147		$	(8,725	)	$	(10,982	)	$	(23,520	)
Unrealized gain (loss) on derivative instruments		(1,450	)		(13	)		1,075			(54	)
Comprehensive income (loss) attributable to common stockholders	$	12,697		$	(8,738	)	$	(9,907	)	$	(23,574	)

See accompanying Notes to Condensed Consolidated Financial Statements.

5

INDUSTRIAL INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

	Stockholders’ Equity
	Common Stock						Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests		Total Equity
(in thousands)	Shares			Amount
Balance as of December 31, 2012		132,424		$	1,324		$	1,184,906		$	(159,894	)	$	(256	)	$	1	$	1,026,081
Net loss		—			—			—			(10,982	)		—			—		(10,982	)
Unrealized gain on derivative instruments		—			—			—			—			1,075			—		1,075
Issuance of common stock		73,656			737			761,215			—			—			—		761,952
Shared-based compensation		—			—			144			—			—			—		144
Offering costs		—			—			(77,958	)		—			—			—		(77,958	)
Redemptions of common stock		(700	)		(7	)		(6,871	)		—			—			—		(6,878	)
Distributions to stockholders		—			—			—			(79,803	)		—			—		(79,803	)
Balance as of September 30, 2013		205,380		$	2,054		$	1,861,436		$	(250,679	)	$	819		$	1	$	1,613,631

See accompanying Notes to Condensed Consolidated Financial Statements.

6

INDUSTRIAL INCOME TRUST INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
(in thousands)	2013			2012
Operating activities:
Net loss	$	(10,982	)	$	(23,520	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Real estate-related depreciation and amortization		84,909			40,547
Equity in loss of unconsolidated joint ventures		2,805			1,911
Loss on early extinguishment of debt		—			874
Gain on acquisition of joint venture		(26,481	)		—
Incentive fee from acquisition of joint venture		(1,985	)		—
Straight-line rent and amortization of above- and below-market leases		(8,562	)		(2,777	)
Bad debt expense		584			425
Other		1,081			990
Changes in operating assets and liabilities
Restricted cash		(457	)		384
Tenant receivables and other assets		(3,352	)		(5,295	)
Accounts payable and other liabilities		17,534			2,375
Due to affiliates, exclusive of offering costs for issuance of common stock		(367	)		211
Net cash provided by operating activities		54,727			16,125
Investing activities:
Real estate acquisitions		(815,634	)		(694,740	)
Acquisition of joint venture		(126,010	)		—
Acquisition deposits		(28,367	)		(9,175	)
Capital expenditures		(55,098	)		(10,328	)
Investments in unconsolidated joint ventures		(19,802	)		(32,799	)
Distributions from unconsolidated joint ventures		3,754			8,817
Other		(247	)		1,319
Net cash used in investing activities		(1,041,404	)		(736,906	)
Financing activities:
Proceeds from issuance of mortgage notes		—			195,453
Repayments of mortgage notes		(9,975	)		(2,239	)
Proceeds from issuance of term loan		300,000			—
Proceeds from lines of credit		705,000			496,006
Repayments of lines of credit		(610,000	)		(443,150	)
Financing costs paid		(1,849	)		(1,830	)
Proceeds from issuance of common stock		721,768			556,474
Offering costs for issuance of common stock		(69,781	)		(55,556	)
Distributions paid to common stockholders		(35,793	)		(19,347	)
Redemptions of common stock		(9,592	)		(2,307	)
Net cash provided by financing activities		989,778			723,504
Net increase in cash and cash equivalents		3,101			2,723
Cash and cash equivalents, at beginning of period		24,550			12,934
Cash and cash equivalents, at end of period	$	27,651		$	15,657
Supplemental disclosure of noncash items:
Offering proceeds due from transfer agent	$	—		$	10,438
Decrease in accrued offering costs		(2,652	)		(1,987	)
Distributions reinvested in common stock		31,853			15,842
Debt assumed on real estate and joint venture acquisitions		241,280			19,266
Acquired investment in unconsolidated joint venture		104,246			—
Noncash repayment of line of credit with new financing		—			110,000
Noncash repayment of note receivable		2,300			—

See accompanying Notes to Condensed Consolidated Financial Statements.

7

INDUSTRIAL INCOME TRUST INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Unless the context otherwise requires, the “Company” refers to Industrial Income Trust Inc. and its consolidated subsidiaries.

The accompanying unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain disclosures normally included in the annual audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been omitted. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on March 6, 2013.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with GAAP.

Recent Accounting Standards

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”), which requires companies to report, either on their income statement or in a footnote to their financial statements, the effects from items that are reclassified out of other comprehensive income. ASU 2013-02 was effective for the Company in the first quarter of 2013. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.

2. ACQUISITIONS

The Company acquired 100% of the following properties during the nine months ended September 30, 2013:

								Intangibles
($ in thousands)	Acquisition Date	Number of Buildings		Land		Building		Intangible Lease Assets		Above- Market Lease Assets		Below- Market Lease Liabilities			Total Purchase Price (1)
Marina West Distribution Center II	4/2/2013		3	$	10,874	$	24,308	$	3,491	$	738	$	(11	)	$	39,400
Beltway Crossing Distribution Center	4/9/2013		4		6,760		29,483		2,180		—		(434	)		37,989
Broadway 101 Commerce Center	5/15/2013		11		17,190		49,881		7,771		2,580		(420	)		77,002
Buckeye Distribution Center	6/7/2013		2		7,096		35,775		3,203		156		(1,953	)		44,277
Carlisle Distribution Center	6/26/2013		2		8,307		28,418		3,975		—		—			40,700
Nashville Portfolio	6/28/2013		3		4,689		37,403		5,725		1,691		(458	)		49,050
Eastern Logistics Portfolio	8/1/2013		3		8,570		32,607		4,406		262		(459	)		45,386
Beckwith Farms Distribution Center I	8/15/2013		1		2,985		29,510		665		—		—			33,160
Fairfield Portfolio	8/27/2013		7		28,407		43,479		5,974		2,413		—			80,273
South Bay Distribution Center	8/29/2013		1		16,574		17,034		—		—		—			33,608
Denver Distribution Center	9/13/2013		1		4,355		36,465		6,787		—		(1,713	)		45,894
Other acquisitions	Various		34		102,938		196,363		36,886		3,227		(10,917	)		328,497
Total acquisitions			72	$	218,745	$	560,726	$	81,063	$	11,067	$	(16,365	)	$	855,236

(1) Total purchase price equals consideration paid. The purchase price allocations are preliminary based on the Company’s estimate of the fair value determined from all available information and therefore, are subject to change upon the completion of the Company’s analysis of appraisals, evaluation of the credit quality of customers, and working capital adjustments within the measurement period, which will not exceed 12 months from the acquisition date.

8

Intangible lease assets and above-market lease assets are amortized over the remaining lease term. Below-market lease liabilities are amortized over the remaining lease term, plus any below-market, fixed-rate renewal option periods. The weighted-average amortization periods for the intangible assets and liabilities acquired in connection with these acquisitions, as of the date of acquisition, were as follows:

Property	Intangibles, net
	(years)
Marina West Distribution Center II	3.3
Beltway Crossing Distribution Center	5.1
Broadway 101 Commerce Center	3.7
Buckeye Distribution Center	3.6
Carlisle Distribution Center	5.5
Nashville Portfolio	6.1
Eastern Logistics Portfolio	7.0
Beckwith Farms Distribution Center I	7.1
Fairfield Portfolio	4.5
South Bay Distribution Center	0.0
Denver Distribution Center	15.1
Other acquisitions	6.7

IIT North American Industrial Fund I Limited Partnership

In August 2011, the Company entered into a joint venture agreement with a subsidiary of a highly-rated, investment grade institutional investor and formed the IIT North American Industrial Fund I Limited Partnership (the “Fund I Partnership”). Immediately prior to the transaction described below, the Company had a 51% ownership interest in the Fund I Partnership, which was treated as an unconsolidated joint venture.

On September 17, 2013, the Company acquired its partner’s 49% interest in the Fund I Partnership. As a result of this transaction, the Company now owns 100% of the Fund I Partnership, and consolidates all of the assets and liabilities and results of operations of the Fund I Partnership in the Company’s financial statements. The Company marked its equity investment in the Fund I Partnership from its carrying value to its estimated fair value. The fair value was determined and allocated based on the Company’s valuation, estimates, and assumptions of the acquisition-date fair value of the tangible and intangible assets and liabilities. The preliminary allocation of assets and liabilities acquired is approximately $510.6 million of net real estate assets, $7.1 million of other assets, $241.3 million of assumed debt, and $12.3 million of assumed other liabilities. Additional detail of the net real estate assets acquired is as follows:

							Intangibles
($ in thousands)	Number of Buildings		Land		Building		Intangible Lease Assets (2)		Above- Market Lease Assets (2)		Below- Market Lease Liabilities (2)			Total Net Real Estate Assets
Fund I Partnership (1)		31	$	151,263	$	334,564	$	27,096	$	3,435	$	(5,808	)	$	510,550

(1) Prior to the transaction and the resulting consolidation of the Fund I Partnership, as described in more detail above, the Company had included certain operating data of the Fund I Partnership in the Company’s total portfolio metrics for the periods the properties were originally acquired by the Fund I Partnership. These properties were previously referred to as “unconsolidated properties.”

(2) The weighted-average amortization period for the intangible assets and liabilities acquired, as of the date of acquisition, was 5.3 years.

While the current allocation of the acquired assets and liabilities is substantially complete, the valuation of the real estate properties is being finalized and is subject to change upon the completion of the Company’s analysis of appraisals, evaluation of the credit quality of customers and working capital adjustments within the measurement period, which will not exceed 12 months from the acquisition date. We do not expect future revisions, if any, to have a significant impact on the Company’s financial position or results of operations.

The fair value of the Company’s equity interest in the Fund I Partnership immediately before the acquisition date was approximately $136.2 million. The Company recorded a gain of approximately $26.5 million based on the acquisition-date fair value of its previously held equity interest in the Fund I Partnership and incentive fee income of approximately $2.0 million.

9

Pro Forma Financial Information (Unaudited)

The table below includes the following: (i) actual revenues and net income (loss) of the Eastern Logistics Portfolio, Beckwith Farms Distribution Center I, Fairfield Portfolio, South Bay Distribution Center, Denver Distribution Center, and Fund I Partnership acquisitions included in the Company’s consolidated statements of operations for the three ended September 30, 2013; (ii) actual revenues and net income (loss) of the Marina West Distribution Center II, Beltway Crossing Distribution Center, Broadway 101 Commerce Center, Buckeye Distribution Center, Carlisle Distribution Center, Nashville Portfolio, Eastern Logistics Portfolio, Beckwith Farms Distribution Center I, Fairfield Portfolio, South Bay Distribution Center, Denver Distribution Center, and Fund I Partnership acquisitions (collectively, referred to as the “2013 acquisitions”) included in the Company’s consolidated statements of operations for the nine months ended September 30, 2013; (iii) actual revenues and net income (loss) of the Memphis Industrial Portfolio, Agave Distribution Center, Somerset Industrial Center II, and Salt Lake City Distribution Center acquisitions included in the Company’s consolidated statements of operations for the three months ended September 30, 2012; (iv) actual revenues and net income (loss) of the IN/PA Industrial Portfolio, Hollins End Industrial Park, Cactus Distribution Centers, Gateway Distribution Center, Houston Industrial Portfolio, Hartman Business Center, Memphis Industrial Portfolio, Agave Distribution Center, Somerset Industrial Center II, and Salt Lake City Distribution Center acquisitions included in the Company’s consolidated statements of operations for the nine months ended September 30, 2012; (v) pro forma revenues and net income of the 2013 acquisitions, as if the date of each acquisition had been January 1, 2012; and (vi) pro forma revenues and net income of the IN/PA Industrial Portfolio, Hollins End Industrial Park, Cactus Distribution Centers, Gateway Distribution Center, Houston Industrial Portfolio, Hartman Business Center, Memphis Industrial Portfolio, Agave Distribution Center, Somerset Industrial Center II, Salt Lake City Distribution Center, Burleson Business Park, Raceway Crossing Industrial Center, Pureland Industrial Portfolio, National Distribution Portfolio, Houston Distribution Portfolio, Freeport Portfolio, Sorenson Distribution Center, and Westport Distribution Center acquisitions, as if the date of each acquisition had been January 1, 2011. The pro forma financial information is not intended to represent or be indicative of the Company’s consolidated financial results that would have been reported had the acquisitions been completed at the beginning of the comparable prior period presented and should not be taken as indicative of its future consolidated financial results.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)	2013			2012			2013			2012
Actual:
Total revenues	$	2,724		$	2,450		$	11,469		$	17,432
Net (loss) income	$	(1,137	)	$	503		$	(4,174	)	$	(172	)
Pro forma:
Total revenues (1)	$	69,945		$	53,527		$	199,262		$	173,912
Net loss (2)	$	(4,471	)	$	(7,753	)	$	(21,450	)	$	(41,525	)

(1) The pro forma total revenues were adjusted to include incremental revenue of $4.8 million and $18.4 million for the three months ended September 30, 2013 and 2012, respectively, and $27.6 million and $88.3 million for the nine months ended September 30, 2013 and 2012, respectively. The incremental rental revenue was determined based on the acquired property’s historical rental revenue and the purchase accounting entries and includes: (i) the incremental base rent adjustments calculated based on the terms of the acquired leases and presented on a straight-line basis and (ii) the incremental reimbursement and other revenue adjustments, which consist primarily of rental expense recoveries, and are determined based on the acquired customer’s historical reimbursement and other revenue.

(2) The pro forma net loss was adjusted to exclude acquisition-related expenses of $10.0 million and $4.8 million for the three months ended September 30, 2013 and 2012, respectively, and $23.3 million and $13.4 million for the nine months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2012, the pro forma net loss was adjusted to include acquisition-related expenses of $23.3 million relating to the 2013 acquisitions, as if these expenses had been incurred as of January 1, 2012. In addition, pro forma net loss for the three and nine months ended September 30, 2013 was adjusted to exclude the gain on the acquisition of the Fund I Partnership of $26.5 million.

10

3. INVESTMENT IN REAL ESTATE PROPERTIES

As of September 30, 2013 and December 31, 2012, the Company’s portfolio of consolidated properties consisted of 293 and 190 industrial buildings, respectively, totaling approximately 56.5 million and 36.9 million square feet, respectively.

(in thousands)	September 30, 2013			December 31, 2012
Land	$	842,214		$	472,206
Building and improvements		2,388,442			1,477,170
Intangible lease assets		385,235			262,975
Construction in progress		9,334			1,892
Investment in real estate properties		3,625,225			2,214,243
Less accumulated depreciation and amortization		(174,475	)		(91,302	)
Net investment in real estate properties	$	3,450,750		$	2,122,941

Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities included the following:

	September 30, 2013									December 31, 2012
(in thousands)	Gross			Accumulated Amortization			Net			Gross			Accumulated Amortization			Net
Intangible lease assets	$	341,655		$	(88,619	)	$	253,036		$	233,407		$	(48,425	)	$	184,982
Above-market lease assets		43,580			(12,037	)		31,543			29,568			(7,079	)		22,489
Below-market lease liabilities		(36,618	)		4,237			(32,381	)		(14,521	)		1,580			(12,941	)

The following table details the estimated net amortization of such intangible lease assets and liabilities, as of September 30, 2013, for the next five years and thereafter:

	Estimated Net Amortization
(in thousands)	Intangible Lease Assets		Above-Market Lease Assets		Below-Market Lease Liabilities
Remainder of 2013	$	17,914	$	2,302	$	(1,453	)
2014		62,060		7,881		(5,405	)
2015		46,991		6,223		(4,677	)
2016		34,729		4,748		(3,757	)
2017		26,433		3,924		(3,019	)
Thereafter		64,909		6,465		(14,070	)
Total	$	253,036	$	31,543	$	(32,381	)

Rental Revenue and Depreciation and Amortization Expense

The following table summarizes straight-line rent adjustments, amortization recognized as an increase (decrease) in rental revenues from above-and below-market lease assets and liabilities, and real-estate related depreciation and amortization expense:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)	2013			2012			2013			2012
Increase (Decrease) to Rental Revenue:
Straight-line rent adjustments	$	5,377		$	1,852		$	11,307		$	5,411
Above-market lease amortization		(2,004	)		(1,249	)		(5,450	)		(3,365	)
Below-market lease amortization		1,134			340			2,705			731
Real Estate-Related Depreciation and Amortization:
Depreciation expense	$	15,276		$	7,167		$	38,889		$	17,033
Intangible lease asset amortization		15,749			9,279			46,020			23,514

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4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The Company enters into joint ventures primarily for purposes of jointly investing in, developing, and acquiring industrial properties located in major U.S. distribution markets. The Company’s investment in joint ventures is included in investment in unconsolidated joint ventures on the Company’s condensed consolidated balance sheet. The following table summarizes the Company’s unconsolidated joint ventures:

				Investment in Unconsolidated Joint Ventures as of
(in thousands, except buildings)	Percent Ownership			September 30, 2013		December 31, 2012
Institutional Joint Ventures:
Fund I Partnership (1)		51	%	$	—	$	94,636
Other Joint Ventures (2):
Park 355 DC II		75	%		3,860		—
Valley Parkway		50	%		4,276		1,854
Total				$	8,136	$	96,490

(1) The Company acquired the remaining interest in the Fund I Partnership on September 17, 2013. See “Note 2” for further details.

(2) Each joint venture is developing one building. The buildings are currently under construction.

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5. DEBT

The Company’s consolidated indebtedness is currently comprised of borrowings under its lines of credit and unsecured term loans, and under its mortgage note financings. The borrowings under its secured line of credit and the mortgage note financings are secured by mortgages or deeds of trust and related assignments and security interests in collateralized and certain cross-collateralized properties, and are generally owned by single purpose entities. A summary of the Company’s debt is as follows:

	Stated Interest Rate at September 30, 2013				Balance as of
(in thousands)				Initial Maturity Date	September 30, 2013		December 31, 2012
Secured line of credit (1)		N/A		June 2013	$	—	$	—
Secured line of credit (2)		2.93	%	November 2014		125,313		—
Unsecured line of credit (3)		1.93	%	August 2015		170,000		75,000
Unsecured term loan (4)		1.88	%	January 2018		200,000		200,000
Unsecured term loan (5)		1.78	%	January 2019		300,000		—
Variable-rate mortgage note (6)		2.18	%	May 2015		9,080		9,080
Fixed-rate mortgage note		5.51	%	June 2015		3,220		3,367
Fixed-rate mortgage note (7)		4.16	%	September 2015		7,560		7,560
Fixed-rate mortgage notes		5.20	%	October 2015		23,125		23,451
Fixed-rate mortgage note		6.24	%	July 2016		6,555		6,710
Fixed-rate mortgage note		5.77	%	March 2017		4,491		4,493
Fixed-rate mortgage note		5.61	%	June 2017		6,328		6,364
Fixed-rate mortgage note		5.56	%	July 2017		9,695		9,803
Fixed-rate mortgage note		4.31	%	September 2017		28,432		28,843
Fixed-rate mortgage notes (8)		4.45	%	June 2018		31,990		31,995
Fixed-rate mortgage note (9)		4.25	%	September 2018		113,496		—
Fixed-rate mortgage notes		3.90	%	January 2019		61,000		61,000
Fixed-rate mortgage notes (10)		4.95	%	October 2020		25,388		25,717
Fixed-rate mortgage note (11)		4.90	%	November 2020		7,405		7,501
Fixed-rate mortgage notes (11)		4.81	%	November 2020		40,279		40,800
Fixed-rate mortgage notes		5.68	%	January 2021		52,276		52,819
Fixed-rate mortgage note		4.95	%	February 2021		9,300		9,365
Fixed-rate mortgage notes		4.70	%	July 2021		110,000		110,000
Fixed-rate mortgage notes		3.30	%	February 2022		105,000		105,000
Fixed-rate mortgage notes		4.25	%	July 2022		82,350		82,350
Fixed-rate mortgage notes (12)		3.50	%	January 2023		106,000		106,000
Fixed-rate mortgage notes		4.15	%	July 2023		104,000		104,000
Fixed-rate mortgage notes		3.95	%	November 2023		84,000		84,000
Total / Weighted-Average		3.28	%		$	1,826,283	$	1,195,218
Gross book value of properties encumbered by debt					$	2,144,805	$	1,646,243

(1) This line of credit was terminated on May 22, 2013. Refer to “Lines of Credit” below for further detail.

(2) As of September 30, 2013, the interest rate was based on one-month London Interbank Offered Rate (“LIBOR”), plus 2.75%.

(3) As of September 30, 2013, the interest rate was based on one-month LIBOR, plus 1.75%.

(4) As of September 30, 2013, the interest rate was based on one-month LIBOR, plus 1.70%.

(5) As of September 30, 2013, the interest rate was based on one-month LIBOR, plus 1.60%.

(6) As of September 30, 2013, the interest rate was based on one-month LIBOR, plus 2.00%.

(7) This mortgage note bears interest at a variable interest rate based on one-month LIBOR, plus 2.50% and had an interest rate of 2.68% and 2.71% as of September 30, 2013 and December 31, 2012, respectively. In conjunction with this mortgage note, the Company entered into an interest rate swap agreement that effectively fixed the interest rate of this mortgage note at 4.16% for the full term. Refer to “Derivative Instruments” below for further detail.

(8) These mortgage notes have a contractual maturity of June 1, 2041; however, the expected maturity date, based on the lender’s ability to call the loan, is June 1, 2018.

(9) This mortgage note has a contractual maturity of October 1, 2041; however, the expected maturity date, based on the lender’s ability to call the loan, is September 1, 2018.

(10) These mortgage notes have a contractual maturity of October 1, 2040; however, the expected maturity date, based on the lender’s ability to call the loan, is October 1, 2020.

(11) These mortgage notes have a contractual maturity of November 1, 2040; however, the expected maturity date, based on the respective lender’s ability to call the loan, is November 1, 2020.

(12) These mortgage notes have a contractual maturity of January 1, 2045; however, the expected maturity date, based on the respective lender’s ability to call the loan, is January 1, 2023.

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As of September 30, 2013, the principal payments due on the Company’s consolidated debt during each of the next five years and thereafter were as follows:

(in thousands)	Amount
Remainder of 2013	$	1,251
2014 (1)		131,977
2015 (2)		222,837
2016		19,909
2017		61,923
Thereafter		1,381,676
Total principal payments		1,819,573
Unamortized premium on assumed debt		6,710
Total debt	$	1,826,283

(1) Includes $125.3 million due under the secured line of credit that matures in November 2014 and may be extended pursuant to two one-year extension options, subject to certain conditions.

(2) Includes $170.0 million due under the unsecured line of credit that matures in August 2015 and may be extended pursuant to two one-year extension options, subject to certain conditions.

Lines of Credit

The secured revolving credit agreement entered into by the Company in June 2011 was terminated on May 22, 2013. This secured revolving credit agreement had an initial aggregate commitment of $40.0 million, up to a maximum aggregate amount of $100.0 million, and was scheduled to mature in June 2013. There were no borrowings under this line of credit during 2013.

In August 2012, the Company entered into an unsecured revolving credit agreement with an initial aggregate commitment of $300.0 million, which was subsequently increased to $500.0 million in September 2013. The Company has the ability to expand the commitment up to a maximum aggregate amount of $600.0 million, subject to certain conditions and receiving bank commitments. This line of credit matures in August 2015, and may be extended pursuant to two one-year extension options, subject to certain conditions. The primary interest rate is variable and calculated based on one-month LIBOR, plus a margin ranging from 1.75% to 2.50%. This line of credit is available for general corporate purposes, including but not limited to the acquisition and operation of industrial properties and other permitted investments. As of September 30, 2013, the Company had $170.0 million outstanding under the line of credit; the unused portion was approximately $330.0 million, of which approximately $118.2 million was available.

In connection with the acquisition of its partner’s interest in the Fund I Partnership in September 2013, which is described in “Note 2,” the Company assumed a secured line of credit agreement that has an initial aggregate commitment of $140.0 million, with the ability to expand the commitment up to a maximum aggregate amount of $300.0 million, subject to certain conditions. This line of credit matures in November 2014, and may be extended pursuant to two one-year extension options, subject to certain conditions. The interest rate is variable and calculated based on LIBOR, plus 2.25% to 2.75%. This line of credit is available to finance the acquisition and operation of collateral properties. Amounts under this line of credit become available when collateral properties are added to the loan agreement. As of September 30, 2013, the Company had $125.3 million outstanding under this line of credit. The unused portion was approximately $14.7 million, of which approximately $10.9 million was available.

Unsecured Term Loans

In December 2012, the Company entered into a $200.0 million unsecured term loan facility, with the ability to increase the size of the unsecured term loan up to a total of $400.0 million, subject to certain conditions. The unsecured term loan requires monthly interest-only payments and has a maturity date of January 2018. The primary interest rate is variable and calculated based on one-month LIBOR, plus a margin ranging from 1.70% to 2.45%, depending on the Company’s consolidated leverage ratio. The unsecured term loan is available for general corporate purposes, including but not limited to the acquisition and operation of industrial properties and other permitted investments. As of September 30, 2013, there was $200.0 million outstanding.

In March 2013, the Company entered into LIBOR-based forward-starting interest rate swap agreements to hedge LIBOR on the unsecured term loan for a notional amount of $200.0 million. The forward-starting interest rate swaps have an effective date of January 14, 2014 and will fix LIBOR at 0.98%, with an all-in interest rate ranging from 2.68% to 3.43%, depending on the Company’s consolidated leverage ratio. The forward-starting interest rate swaps will expire on October 14, 2017. Refer to “Derivative Instruments” below for additional detail.

In September 2013, the Company entered into a $300.0 million unsecured term loan facility, with the ability to increase the size of the unsecured term loan up to a total of $500.0 million, subject to certain conditions. The unsecured term loan requires monthly interest-

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only payments and has a maturity date of January 2019. The primary interest rate is variable and calculated based on one-month LIBOR, plus a margin ranging from 1.50% to 2.35%, depending on the Company’s consolidated leverage ratio. The unsecured term loan is available for general corporate purposes, including but not limited to the acquisition and operation of industrial properties and other permitted investments. As of September 30, 2013, there was $300.0 million outstanding. Subsequent to September 30, 2013, the Company entered into LIBOR-based forward-starting interest rate swap agreements to hedge this unsecured term loan. See “Note 11” for additional detail.

Debt Covenants

The Company’s mortgage note financings, lines of credit, and unsecured term loans contain various property level covenants, including customary affirmative and negative covenants. In addition, the lines of credit contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth restrictions. The Company was in compliance with all debt covenants as of September 30, 2013.

Derivative Instruments

To manage interest rate risk for certain of its variable rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involved the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of September 30, 2013, the Company had four outstanding interest rate swap contracts that were designated as cash flow hedges of interest rate risk, including three interest rate swap contracts entered into in March 2013 that directly related to the December 2012 unsecured term loan, as described above. Certain of the Company’s variable rate borrowings are not hedged, and therefore, to an extent, the Company has on-going exposure to interest rate movements.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flows hedges is recorded in accumulated other comprehensive income (“AOCI”) on the condensed consolidated balance sheets and is subsequently reclassified into earnings for the period that the hedged forecasted transaction affects earnings, which is when the interest expense is recognized on the related debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. For the three and nine months ended September 30, 2013 and 2012, there was no hedge ineffectiveness. The Company expects no hedge ineffectiveness in the next 12 months.

The following table summarizes the location and fair value of the cash flow hedges on the Company’s condensed consolidated balance sheets:

				Fair Value as of
(in thousands)	Notional Amount		Balance Sheet Location	September 30, 2013		December 31, 2012
Interest rate swaps	$	207,560	Other assets / (Other liabilities)	$	819	$	(256	)

The following table presents the effect of the Company’s cash flow hedges on the Company’s condensed consolidated statements of operations:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)	2013			2012			2013			2012
Interest rate swaps:
Gain (loss) recognized in AOCI (effective portion)	$	(1,421	)	$	14		$	1,158		$	27
Loss reclassified from AOCI into income (effective portion)		(29	)		(27	)		(83	)		(81	)

6. FAIR VALUE

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. Fair value measurements are categorized into one of three levels of the fair value hierarchy based on the lowest level of significant input used. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Considerable judgment and a high degree of subjectivity are involved in developing these estimates. These estimates may differ from the actual amounts that the Company could realize upon settlement.

The fair value hierarchy is as follows:

Level 1 – Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 – Other observable inputs, either directly or indirectly, other than quoted prices included in Level 1, including:

• Quoted prices for similar assets/liabilities in active markets;

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• Quoted prices for identical or similar assets/liabilities in non-active markets (e.g., few transactions, limited information, non-current prices, high variability over time);

• Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield curves, volatilities, default rates); and

• Inputs that are derived principally from or corroborated by other observable market data.

Level 3 – Unobservable inputs that cannot be corroborated by observable market data.

The following table presents financial instruments measured at fair value on a recurring basis:

(in thousands)	Level 1		Level 2		Level 3		Total Fair Value
September 30, 2013
Assets
Derivative instruments	$	—	$	819	$	—	$	819
Total assets measured at fair value	$	—	$	819	$	—	$	819
December 31, 2012
Liabilities
Derivative instruments	$	—	$	256	$	—	$	256
Total liabilities measured at fair value	$	—	$	256	$	—	$	256

As of September 30, 2013 and December 31, 2012, the Company had no financial instruments that were transferred among the fair value hierarchy levels. The Company also had no non-financial assets or liabilities that were required to be measured at fair value on a recurring basis.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Derivative Instruments.The derivative instruments are interest rate swaps. The interest rate swaps are standard cash flow hedges whose fair value is estimated using market-standard valuation models. Such models involve using market-based observable inputs, including interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Due to the interest rate swaps being unique and not actively traded, the fair value is classified as Level 2. See “Note 5” above for further discussion of the Company’s derivative instruments.

The table below includes fair values for certain financial instruments for which it is practicable to estimate fair value. The carrying values and fair values of these financial instruments were as follows:

	September 30, 2013				December 31, 2012
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Notes receivable	$	3,612	$	3,626	$	5,912	$	5,923
Derivative instruments		819		819		—		—
Liabilities
Lines of credit		295,313		296,486		75,000		75,000
Unsecured term loans		500,000		500,827		200,000		200,000
Mortgage notes		1,030,970		1,036,816		920,218		957,419
Derivative instruments		—		—		256		256

In addition to the previously described methods and assumptions for the derivative instruments, the following are the methods and assumptions used to estimate the fair value of the other financial instruments:

Notes Receivable.The fair value is estimated by discounting the expected cash flows on the notes receivable at current rates at which the Company believes similar loans would be made. Credit spreads and market interest rates used to determine the fair value of these instruments are based on Level 3 inputs. As of September 30, 2013, the Company had a note receivable of $1.3 million with a maturity date of January 1, 2015 and a note receivable of $2.3 million with a maturity date of January 1, 2015. The loans were made by the Company to the seller of two of the buildings acquired by the Company, and are secured by land and seller guarantees. Amounts outstanding and accrued interest on the notes receivable are due on the respective maturity dates.

Lines of Credit.The fair value of the lines of credit is estimated using discounted cash flow methods based on the Company’s estimate of market interest rates, which the Company has determined to be its best estimate of current market spreads over comparable term benchmark rates of similar instruments. Credit spreads relating to the underlying instruments are based on Level 3 inputs.

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Unsecured Term Loans. The fair value of the term loans is estimated using discounted cash flow methods based on the Company’s estimate of market interest rates, which the Company has determined to be its best estimate of current market spreads over comparable term benchmark rates of similar instruments. Credit spreads relating to the underlying instruments are based on Level 3 inputs.

Mortgage Notes.The fair value of the mortgage notes is estimated using discounted cash flow methods based on the Company’s estimate of market interest rates, which the Company has determined to be its best estimate of current market spreads over comparable term benchmark rates of similar instruments. Credit spreads relating to the underlying instruments are based on Level 3 inputs.

The fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and distributions payable approximate their carrying values because of the short-term nature of these instruments. As such, these assets and liabilities are not listed in the carrying value and fair value table above.

7. STOCKHOLDERS’ EQUITY

Public Offerings

On May 22, 2009, the Company filed a registration statement with the SEC on Form S-11 in connection with the initial public offering of up to $2.0 billion in shares of common stock (the “Initial Offering”). The registration statement was subsequently declared effective on December 18, 2009. Pursuant to the registration statement for the Initial Offering, the Company offered for sale up to $1.5 billion in shares of common stock at a price of $10.00 per share, and up to $500.0 million in shares under the Company’s distribution reinvestment plan at a price of $9.50 per share. Dividend Capital Securities LLC (the “Dealer Manager”) provided dealer manager services in connection with the Initial Offering. The Initial Offering closed on April 16, 2012.

On April 17, 2012, the SEC declared effective the Company’s registration statement on Form S-11 (Registration No. 333-175340) for the Company’s follow-on public offering of up to $2.4 billion in shares of common stock (the “Follow-On Offering”), and the Follow-On Offering commenced the same day. Pursuant to the registration statement for the Follow-On Offering, the Company offered for sale up to $1.8 billion in shares of common stock at a price of $10.40 per share, and up to $600.0 million in shares under the Company’s distribution reinvestment plan at a price of $9.88 per share. The Dealer Manager provided dealer manager services in connection with the Follow-On Offering.

On July 18, 2013, the Company terminated the offering of primary shares pursuant to the Company’s Follow-On Offering. From inception through July 18, 2013, the Company raised gross proceeds of approximately $2.1 billion from the sale of approximately 207.2 million shares of its common stock in its public offerings, including approximately $63.8 million from the sale of approximately 6.5 million shares of its common stock through the Company’s distribution reinvestment plan. The Company is continuing to offer and sell shares pursuant to its distribution reinvestment plan. The Company may terminate its distribution reinvestment plan offering at any time.

Distributions

The Company intends to accrue and make distributions on a regular basis. The Company calculates individual payments of distributions to each stockholder based upon daily record dates during each quarter so that investors are eligible to earn distributions immediately upon purchasing shares of the Company’s common stock. The distributions are calculated based on common stockholders of record as of the close of business each day in the period. Stockholders may elect to have cash distributions reinvested in share of the Company’s common stock through its distribution reinvestment plan.

		Amount
(in thousands, except per share data)	Payment Date	Declared per Common Share		Paid in Cash		Reinvested in Shares		Total Distributions
2013
September 30	October 15, 2013	$	0.15625	$	15,939	$	15,786	$	31,725
June 30	July 15, 2013		0.15625		13,457		12,516		25,973
March 31	April 15, 2013		0.15625		11,782		10,323		22,105
Total				$	41,178	$	38,625	$	79,803
2012
December 31	January 15, 2013	$	0.15625	$	10,554	$	9,014	$	19,568
September 30	October 15, 2012		0.15625		9,408		8,089		17,497
June 30	July 16, 2012		0.15625		8,435		7,287		15,722
March 31	April 16, 2012		0.15625		6,137		4,902		11,039
Total				$	34,534	$	29,292	$	63,826

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Redemptions

In February 2012, the Company’s board of directors approved and adopted amendments, in connection with the board’s determination of a primary offering price of $10.40 per share for the Follow-On Offering that impacted the price at which shares are redeemed pursuant to the Company’s share redemption program. The amendments modified the Company’s share redemption program to adjust the calculation of the redemption price per share, effective as of June 1, 2012. Therefore, shares redeemed pursuant to eligible redemption requests received during the first quarter of 2012 were redeemed pursuant to the terms of the prior share redemption program and any shares redeemed thereafter have been and will be redeemed pursuant to the terms of the amended share redemption program.

Per the terms of the amended share redemption program, subject to certain restrictions and limitations, a stockholder may redeem shares of the Company’s common stock for cash at a price that may reflect a discount from the purchase price paid for the shares of common stock being redeemed. Shares of common stock must be held for a minimum of one year, subject to certain exceptions. The Company is not obligated to redeem shares of its common stock under the share redemption program. The Company presently limits the number of shares to be redeemed during any consecutive 12-month period to no more than five percent of the number of shares of common stock outstanding at the beginning of such 12-month period. The Company also limits redemptions in accordance with a quarterly cap. With respect to shares of the Company’s common stock purchased pursuant to the Initial Offering, including shares purchased through the Company’s distribution reinvestment plan, the original purchase price was increased by 4.0%, which is the amount by which the offering price increased between the Initial Offering and the Follow-On Offering (the “Initial Offering Adjustment”), subject to the adjustments applicable to shares of common stock in connection with a redemption request with respect to the death of a stockholder. The discount from the purchase price paid (as increased, if applicable, by the Initial Offering Adjustment) for the redeemed shares will vary based upon the length of time that the shares of common stock have been held, as follows:

Share Purchase Anniversary	Redemption Price as a Percentage of Original Purchase Price (as increased, if applicable, by the Initial Offering Adjustment)
Less than one year		No redemption allowed
One year		92.5	%
Two years		95.0	%
Three years		97.5	%
Four years and longer		100.0	%

The following table summarizes the Company’s redemption activity:

	For the Nine Months Ended September 30,
(in thousands, except per share amount)	2013		2012
Number of eligible shares redeemed		700		337
Aggregate amount of shares redeemed	$	6,878	$	3,268
Average redemption price per share	$	9.83	$	9.68

8. SHARE-BASED COMPENSATION

The Company’s Amended and Restated Equity Incentive Plan, effective as of January 18, 2013 (the “Equity Incentive Plan”), provides for the grant of options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents rights or other share-based awards. Directors, officers, and employees (if any) of the Company, as well as any advisor or consultant, including employees of the Advisor and the property manager, are eligible to receive awards under the Equity Incentive Plan; provided, that, the services provided by the individual are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s common stock. The Company has registered a total of 2.0 million shares of common stock for issuance pursuant to the Equity Incentive Plan, subject to certain adjustments set forth in the plan.

In April 2013, the Company granted an aggregate of approximately 30,000 shares of restricted stock to certain eligible individuals under the Equity Incentive Plan. The awards vest over a three-year period as follows: 25% in April 2013 and 25% on each of the first three anniversaries of the grant date.

The Company accounts for share-based compensation related to the restricted stock issued to certain eligible individuals using the fair value based methodology, which is based upon the stock price on the vesting date and requires the amount of related expense to be adjusted to the fair value of the award at the end of each reporting period until the awards have fully vested. Share-based compensation expense for the restricted stock is amortized using a graded vesting attribution method and is recognized in general and administrative expenses in the Company’s consolidated statements of operations.

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A summary of the Company’s restricted stock activity for the nine months ended September 30, 2013 is below:

(shares in thousands)	Shares			Weighted-Average Fair Value per Share
Nonvested shares at beginning of period		—		$	—
Granted		30		$	10.40
Vested		(7	)	$	10.40
Forfeited		(1	)	$	10.40
Nonvested shares at end of period		22		$	10.40

The following table summarizes other share-based compensation data:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands, except per share data)	2013		2012		2013		2012
Share-based compensation expense	$	22	$	—	$	144	$	—
Total fair value of restricted stock vested	$	—	$	—	$	77	$	—
Weighted-average grant date fair value of restricted stock granted, per share (1)	$	10.40	$	—	$	10.40	$	—

(1) Based on the Company’s public offering price of $10.40 per share on the grant date.

As of September 30, 2013, the aggregate unrecognized compensation cost related to the restricted stock was approximately $154,000 and is expected to be fully recognized over a weighted-average period of 1.1 years.

9. RELATED PARTY TRANSACTIONS

The Company relies on Industrial Income Advisors LLC (the “Advisor”), a related party, to manage the Company’s day-to-day operating and acquisition activities and to implement the Company’s investment strategy pursuant to the terms of a fourth amended and restated advisory agreement (the “Advisory Agreement”), dated February 21, 2013, by and among the Company, Industrial Income Operating Partnership LP (the “Operating Partnership”), and the Advisor. The Advisor is considered to be a related party of the Company because certain indirect owners and officers of the Advisor serve as directors and/or executive officers of the Company. The Dealer Manager, also a related party, provides dealer manager services. The Advisor and Dealer Manager receive compensation in the form of fees and expense reimbursements for services relating to the Company’s public offerings and for the investment and management of the Company’s assets. The following summarizes the fees and expense reimbursements:

Sales Commissions. Sales commissions are payable to the Dealer Manager, all of which are reallowed to participating unaffiliated broker-dealers, and are equal to up to 7.0% of the gross proceeds from the Follow-On Offering. These sales commissions were also payable in connection with the Initial Offering.

Dealer Manager Fees. Dealer manager fees are payable to the Dealer Manager and are equal to up to 2.5% of the gross proceeds from the Follow-On Offering. These dealer manager fees were also payable in connection with the Initial Offering.

Acquisition Fees. For each real property acquired in the operational stage, the acquisition fee is an amount equal to 1.0% of the total purchase price of the properties acquired (or the Company’s proportional interest therein), including in all instances real property held in joint ventures or co-ownership arrangements. In connection with providing services related to the development, construction, improvement and stabilization, including tenant improvements of real properties, which the Company refers to collectively as development services, or overseeing the provision of these services by third parties on the Company’s behalf, which it refers to as development oversight services, the acquisition fee, which the Company refers to as the development acquisition fee, will equal up to 4.0% of total project cost, including debt, whether borrowed or assumed (or the Company’s proportional interest therein with respect to real properties held in joint ventures or co-ownership arrangements). If the Advisor engages a third party to provide development services directly to the Company, the third party will be compensated directly by the Company and the Advisor will receive the development acquisition fee if it provides the development oversight services.

Asset Management Fees. Asset management fees consist of a monthly fee of one-twelfth of 0.80% of the aggregate cost (including debt, whether borrowed or assumed) (before non-cash reserves and depreciation) of each real property asset within the Company’s portfolio (or the Company’s proportional interest therein with respect to real estate property held in joint ventures, co-ownership arrangements or real estate-related entities in which the Company owns a majority economic interest or that the Company consolidates for financial reporting purposes). Asset management fees are also paid in connection with a disposition, which may involve a sale, merger, or other transaction, in an amount equal to 2.0% of the total consideration paid in connection with the disposition.

Organization and Offering Expenses. The Company reimburses the Advisor for cumulative organization expenses and for cumulative expenses of its offerings up to 1.75% of the gross offering proceeds from its offerings. Organizational costs are expensed

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and offering costs are reflected as a reduction in additional paid in capital. The Advisor or an affiliate of the Advisor is responsible for the payment of the Company’s cumulative organization and offering expenses to the extent the total of such cumulative expenses exceeds the 1.75% organization and offering expense reimbursements from the Company’s offerings, without recourse against or reimbursement by the Company. If the Company does not raise additional equity proceeds, no additional amounts will be payable by the Company to the Advisor for reimbursement of cumulative organization and offering expenses.

Other Expense Reimbursements.In addition to the reimbursement of organization and offering expenses, the Company is also obligated, subject to certain limitations, to reimburse the Advisor for certain costs incurred by the Advisor or its affiliates, such as personnel and overhead expenses, in connection with the services provided to the Company under the Advisory Agreement, provided that the Advisor does not receive a specific fee for the activities which generate the expenses to be reimbursed. The Advisor may utilize its officers to provide such services and in certain instances those individuals may include the Company’s principal executive officer and principal financial officer.

The table below summarizes the fees and expenses incurred by the Company for services provided by the Advisor and the Dealer Manager related to the services described above, and any related amounts payable:

	Incurred
	For the Three Months				For the Nine Months				Payable as of
	Ended September 30,				Ended September 30,				September 30,		December 31,
(in thousands)	2013		2012		2013		2012		2013 (1)		2012 (1)
Expensed:
Acquisition fees (2)	$	5,627	$	2,510	$	10,961	$	7,322	$	—	$	—
Asset management fees		6,077		3,214		15,831		7,977		—		—
Other expense reimbursements		182		393		691		1,109		62		—
Total	$	11,886	$	6,117	$	27,483	$	16,408	$	62	$	—
Additional Paid-In Capital:
Sales commissions	$	14,468	$	7,281	$	49,245	$	34,754	$	—	$	609
Dealer manager fees		5,419		2,957		18,294		14,237		—		445
Organization and offering expenses		3,774		2,181		13,101		10,154		—		453
Total	$	23,661	$	12,419	$	80,640	$	59,145	$	—	$	1,507

(1) In addition, amounts accrued for organization and offering expense reimbursements that are not payable until additional gross proceeds of the offerings are received were $0 and $2.4 million, respectively, as of September 30, 2013 and December 31, 2012. The Company reimbursed the Advisor for cumulative organization expenses and for cumulative expenses of its offerings up to 1.75% of the gross offering proceeds from its offerings.

(2) In addition, for the nine months ended September 30, 2013, the Company paid to the Advisor approximately $0.9 million of development acquisition fees, which is included in the total development project cost and is capitalized in construction in progress on the Company’s condensed consolidated balance sheet.

Joint Venture Fees.The Fund I Partnership, as described in “Note 2,” has paid fees to the Advisor or its affiliates for providing services to the Fund I Partnership. These fees were paid directly to the Advisor or its affiliates or indirectly, including, without limitation, through the Company or its subsidiaries. For the nine months ended September 30, 2013 and 2012, the Fund I Partnership paid to the Advisor approximately $3.3 million and $1.7 million, respectively, in fees for providing a variety of services, including with respect to acquisition and asset management activities. With respect to the Company’s percentage interest in the Fund I Partnership, the Company has paid to the Advisor any additional amount necessary, after taking into account amounts paid directly by the Fund I Partnership to the Advisor, to provide that the Advisor receives the total amount of fees payable pursuant to the Advisory Agreement.

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10. COMMITMENTS AND CONTINGENCIES

The Company and the Operating Partnership are not presently involved in any material litigation nor, to the Company’s knowledge, is any material litigation threatened against the Company or its investments.

Environmental Matters

A majority of the properties the Company acquires are subject to environmental reviews either by the Company or the previous owners. In addition, the Company may incur environmental remediation costs associated with certain land parcels it may acquire in connection with the development of land. The Company has acquired certain properties in urban and industrial areas that may have been leased to or previously owned by commercial and industrial companies that discharged hazardous material. The Company may purchase various environmental insurance policies to mitigate its exposure to environmental liabilities. The Company is not aware of any environmental liabilities that it believes would have a material adverse effect on its business, financial condition, or results of operations.

11. SUBSEQUENT EVENTS

Derivative Instruments

In October 2013, the Company entered into LIBOR-based forward-starting interest rate swap agreements to hedge LIBOR on the unsecured term loan for a notional amount of $300.0 million. The forward-starting interest rate swaps have an effective date of January 20, 2015 and will fix LIBOR at 1.81%, with an all-in interest rate ranging from 3.31% to 4.16%, depending on the Company’s consolidated leverage ratio. The forward-starting interest rate swaps will expire on October 20, 2018.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References to the terms “we,” “our,” or “us” refer to Industrial Income Trust Inc. and its consolidated subsidiaries. The following discussion and analysis should be read together with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain statements that may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements relate to, without limitation, rent and occupancy growth, general conditions in the geographic area where we operate, our future debt and financial position, our future capital expenditures, future distributions and acquisitions (including the amount and nature thereof), other developments and trends of the real estate industry, business strategies and the expansion and growth of our operations. Forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “project,” or the negative of these words or other comparable terminology. These statements are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions, and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

• Unexpected delays or costs associated with our development projects;

• The failure of acquisitions to perform as we expect;

• Our failure to successfully integrate acquired properties and operations;

• The availability of cash flows from operating activities for distributions and capital expenditures;

• Defaults on or non-renewal of leases by customers, lease renewals at lower than expected rent, or failure to lease properties at all or on favorable rents and terms;

• Continued or worsening difficulties in economic conditions generally and the real estate, debt, and securities markets specifically;

• Legislative or regulatory changes, including changes to the laws governing the taxation of real estate investment trusts (“REITs”);

• Our failure to obtain, renew, or extend necessary financing or access the debt or equity markets;

• Conflicts of interest arising out of our relationships with Industrial Income Advisors Group LLC (the “Sponsor”), the Advisor, and their affiliates;

• Risks associated with using debt to fund our business activities, including re-financing and interest rate risks;

• Increases in interest rates, operating costs, or greater than expected capital expenditures;

• Changes to GAAP; and

• Our ability to qualify as a REIT.

Any of the assumptions underlying forward-looking statements could prove to be inaccurate. Our stockholders are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report on Form 10-Q. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report on Form 10-Q will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, changed circumstances, or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report on Form 10-Q, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report on Form 10-Q will be achieved.

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OVERVIEW

General

Industrial Income Trust Inc. is a Maryland corporation formed on May 19, 2009 that has operated and elected to be treated as a REIT for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2010. We were organized to make investments in income-producing real estate assets consisting primarily of high-quality distribution warehouses and other industrial properties that are leased to creditworthy corporate customers. We utilize an UPREIT organizational structure to hold all or substantially all of our assets through the Operating Partnership.

On December 18, 2009, we commenced the Initial Offering of up to $2.0 billion in shares of our common stock, including $1.5 billion in shares of common stock offered at a price of $10.00 per share and $500.0 million in shares offered under our distribution reinvestment plan at a price of $9.50 per share. On April 17, 2012, immediately following the end of the Initial Offering, which closed on April 16, 2012, we commenced the Follow-On Offering of up to $2.4 billion in shares of our common stock, including $1.8 billion in shares of common stock offered at a price of $10.40 per share and $600.0 million in shares offered under our distribution reinvestment plan at a price of $9.88 per share. On July 18, 2013, we terminated the offering of primary shares pursuant to our Follow-On Offering. From inception through July 18, 2013, we raised gross proceeds of approximately $2.1 billion from the sale of approximately 207.2 million shares of our common stock in our public offerings, including approximately $63.8 million from the sale of approximately 6.5 million shares of our common stock through our distribution reinvestment plan. We are continuing to offer and sell shares pursuant to our distribution reinvestment plan. We may terminate our distribution reinvestment plan offering at any time.

As of September 30, 2013, we directly owned a portfolio that included 293 industrial buildings totaling approximately 56.5 million square feet with 550 customers throughout the U.S. with a weighted-average remaining lease term (based on square feet) of 5.4 years. Of the 293 industrial buildings we owned and managed as of September 30, 2013:

• 281 industrial buildings totaling approximately 54.3 million square feet comprised our operating portfolio, which includes stabilized properties, and was 94% occupied (94% leased). 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.

• 12 industrial buildings totaling approximately 2.2 million square feet comprised our development portfolio, which 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 completion or a building achieving 90% occupancy.

We have used the net proceeds from our public offerings primarily to make investments in real estate assets. We may continue to acquire real estate assets through funds provided by debt financings, cash flows generated from our operating properties, cash on-hand, or dispositions. The number and type of properties we may acquire and debt and other investments we may make will depend upon real estate market conditions and other circumstances existing at the time we make our investments.

Our primary investment objectives include the following:

• Preserving and protecting our stockholders’ capital contributions;

• Providing current income to our stockholders in the form of regular cash distributions; and

• Realizing capital appreciation upon the potential sale of our assets or other liquidity events.

There is no assurance that we will attain our investment objectives. Our charter places numerous limitations on us with respect to the manner in which we may invest our funds. In most cases these limitations cannot be changed unless our charter is amended, which may require the approval of our stockholders.

We may acquire assets free and clear of mortgage or other indebtedness by paying the entire purchase price in cash or equity securities, or a combination thereof, and we may selectively encumber all or certain assets with debt. The proceeds from our borrowings may be used to fund investments, make capital expenditures, pay distributions, and for general corporate purposes. As of September 30, 2013 and December 31, 2012, our consolidated debt leverage ratio (calculated as the book value of our debt to total assets) was 51.0% and 52.1%, respectively.

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Industrial Real Estate Outlook

Industrial property fundamentals continue to reflect global economic conditions. The economic environment has improved over the past three years, including: (i) positive overall gross domestic product (“GDP”) growth; (ii) increased domestic consumer spending, including significant growth in online retailing (or e-tailing); (iii) positive trade growth as reflected in increased port volumes, truck tonnage, and rail carload data; (iv) positive net absorption in certain markets; and (v) improved access to capital for certain companies. While the strength and sustainability of the recovery remain uncertain, especially with high unemployment levels, we expect demand in the U.S. for industrial warehouse properties to continue to improve with GDP and trade growth. The industrial warehouse sector has generally experienced a challenging leasing environment over the past several years, with increased rental costs and lower average re-leasing rates due to competitive market availability levels. We believe market rents will trend upward as market occupancies improve. While we actively seek to lease our vacant space, if economic uncertainty persists, we may experience longer vacancy periods, higher leasing costs, or be required to reduce rental rates on renewals.

The domestic and international capital markets experienced significant disruptions in 2008 and 2009 that severely impacted the availability and cost of credit. Since then, the volume of mortgage lending for commercial real estate and unsecured credit for REITs have increased and lending terms have improved; however, such lending activity is significantly less than previous peak levels and underlying treasury rates have recently increased rather quickly compared to historic lows. Although capital market conditions have improved, we have experienced, and may continue to experience, more stringent lending criteria, which may affect our ability to finance certain property acquisitions. Additionally, for properties for which we are able to obtain financing, the interest rates and other terms on such loans may limit our operating and investing flexibility. We have managed, and expect to continue to manage, our financing strategy under the current mortgage lending and REIT financing environment by considering various lending sources, including securitizable debt, fixed interest rate loans, lines of credit or term loans, and assuming existing mortgage loans in connection with property acquisitions, or any combination of the foregoing. If we are unable to obtain suitable financing for future acquisitions or if we are unable to identify suitable properties at attractive prices in the current credit environment, we may have a larger amount of uninvested cash, which could adversely affect our results of operations.

RESULTS OF OPERATIONS

Summary of 2013 Activities

During the nine months ended September 30, 2013, we completed the following activities:

• We raised approximately $762.0 million of gross equity capital from the Follow-On Offering.

• We directly acquired 72 buildings comprising approximately 12.4 million square feet for an aggregate total purchase price of approximately $855.2 million, exclusive of transfer taxes, due diligence expenses, and other closing costs. We funded these acquisitions with proceeds from our public offering and debt financings.

• In September 2013, we acquired our partner’s interest in the Fund I Partnership joint venture for a purchase price of $129.6 million, as well as assumed the Fund I Partnership’s debt in the amount of approximately $241.3 million. As of the date of this acquisition, the Fund I Partnership had acquired 31 buildings aggregating approximately 7.2 million square feet.

• In September 2013, we entered into a $300.0 million unsecured term loan, with the ability to increase the size of the unsecured term loan up to a total of $500.0 million, subject to certain conditions. The maturity date is January 15, 2019. The primary interest rate as of September 30, 2013 was 1.78% and is based on LIBOR, plus a margin ranging from 1.50% to 2.35%. Subsequent to September 30, 2013, we entered into LIBOR-based forward-starting interest rate swap agreements to hedge our $300.0 million unsecured term loan. See “Subsequent Events” below for additional detail.

• As of September 30, 2013, our total operating portfolio was 94% occupied and 94% leased, as compared to 95% occupied and 96% leased as of December 31, 2012.

• We leased approximately 6.6 million square feet, which included 3.8 million square feet of new leases and expansions and 2.8 million square feet of renewals and future leases. Future leases are new leases for units that are entered into while the units are occupied by the current customer.

We have been in the acquisition phase of our life cycle and the results of our operations are primarily impacted by the timing of our acquisitions and the equity raised through our public offerings. Accordingly, our operating results for the three and nine months ended September 30, 2013 and 2012 are not directly comparable, nor are our results of operations for the three and nine months ended September 30, 2013 and 2012 indicative of those expected in future periods. We believe that our revenues and operating expenses will continue to increase in future periods as a result of continued growth in our current portfolio and as a result of the additive effect of anticipated future acquisitions of industrial properties.

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Portfolio Information

Our total owned and managed portfolio was as follows:

	As of
(square feet in thousands)	September 30, 2013			December 31, 2012			September 30, 2012
Portfolio data:
Consolidated buildings		293			190			147
Unconsolidated buildings (1)		—			29			26
Total buildings		293			219			173
Rentable square feet of consolidated buildings		56,532			36,898			27,871
Rentable square feet of unconsolidated buildings		—			6,181			5,377
Total rentable square feet		56,532			43,079			33,248
Total number of customers		550			414			329
Percent occupied of operating portfolio		94	%		95	%		96	%
Percent occupied of total portfolio		91	%		90	%		92	%
Percent leased of operating portfolio		94	%		96	%		96	%
Percent leased of total portfolio		92	%		92	%		93	%

(1) In September 2013, we acquired our partner’s interest in the Fund I Partnership joint venture. As of the date of acquisition, the Fund I Partnership included 31 buildings aggregating approximately 7.2 million square feet. Refer to “Note 2” of our condensed consolidated financial statements for further detail regarding this acquisition.

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Three and Nine Months Ended September 30, 2013 Compared to Same Periods in 2012

The following table summarizes our results and operations for the three and nine months ended September 30, 2013 as compared to the three and nine months ended September 30, 2012. We evaluate the performance of operating properties we own and manage using a same store analysis because the population of properties in this analysis is consistent from period to period, thereby eliminating the effects of changes in the composition of the portfolio on performance measures. We have defined the same store portfolio to include operating properties owned for the entirety of both the current year and prior year reporting periods for which the operations had been stabilized. Other properties include buildings not meeting the same store criteria. The same store operating portfolio for the three month periods presented below included 129 buildings owned as of July 1, 2012 and for the nine month periods presented below included 91 buildings owned as of January 1, 2012.

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,
(in thousands, except per share data)	2013			2012			Change			2013			2012			Change
Rental revenues:
Same store operating properties	$	31,790		$	30,618		$	1,172		$	61,576		$	60,614		$	962
Other properties		33,308			4,307			29,001			110,078			25,008			85,070
Total rental revenues		65,098			34,925			30,173			171,654			85,622			86,032
Rental expenses:
Same store operating properties		8,041			7,344			697			16,179			14,681			1,498
Other properties		8,802			1,090			7,712			27,462			5,856			21,606
Total rental expenses		16,843			8,434			8,409			43,641			20,537			23,104
Net operating income:
Same store operating properties		23,749			23,274			475			45,397			45,933			(536	)
Other properties		24,506			3,217			21,289			82,616			19,152			63,464
Total net operating income		48,255			26,491			21,764			128,013			65,085			62,928
Other:
Real estate-related depreciation and amortization		(31,025	)		(16,446	)		(14,579	)		(84,909	)		(40,547	)		(44,362	)
General and administrative expenses		(1,661	)		(1,327	)		(334	)		(5,114	)		(4,166	)		(948	)
Asset management fees, related party		(6,077	)		(3,214	)		(2,863	)		(15,831	)		(7,977	)		(7,854	)
Acquisition-related expenses, related party		(5,627	)		(2,510	)		(3,117	)		(10,961	)		(7,322	)		(3,639	)
Acquisition-related expenses		(4,347	)		(2,323	)		(2,024	)		(12,315	)		(6,039	)		(6,276	)
Equity in loss of unconsolidated joint ventures		(1,349	)		(491	)		(858	)		(2,805	)		(1,911	)		(894	)
Interest expense and other		(12,488	)		(8,031	)		(4,457	)		(35,526	)		(19,769	)		(15,757	)
Loss on early extinguishment of debt		—			(874	)		874			—			(874	)		874
Gain on acquisition of joint venture		26,481			—			26,481			26,481			—			26,481
Incentive fee from acquisition of joint venture		1,985			—			1,985			1,985			—			1,985
Total other		(34,108	)		(35,216	)		1,108			(138,995	)		(88,605	)		(50,390	)
Net income (loss)		14,147			(8,725	)		22,872			(10,982	)		(23,520	)		12,538
Net income (loss) attributable to noncontrolling interests		—			—			—			—			—			—
Net income (loss) attributable to common stockholders	$	14,147		$	(8,725	)	$	22,872		$	(10,982	)	$	(23,520	)	$	12,538
Weighted-average shares outstanding		203,024			111,996			91,028			170,474			94,484			75,990
Net income (loss) per common share - basic and diluted	$	0.07		$	(0.08	)	$	0.15		$	(0.06	)	$	(0.25	)	$	0.19

Rental Revenues. Rental revenues are comprised of base rent, straight-line rent, amortization of above- and below-market rent lease assets and liabilities, and customer reimbursement revenue. Total rental revenues increased significantly for the three and nine months ended September 30, 2013, as compared to the same periods in 2012, primarily due to the increase in non-same store rental revenues, which was attributable to the growth in our portfolio. For the three months ended September 30, 2013, non-same store rental revenues reflects the addition of 161 buildings we acquired since July 1, 2012, and for the nine months ended September 30, 2013, non-same store rental revenues reflects the addition of 199 buildings we acquired since January 1, 2012. The increase in the number of buildings acquired for both the three and nine months ended September 30, 2013 includes the consolidated results of the 31 properties acquired in conjunction with our acquisition of our partner’s interest in the Fund I Partnership joint venture, which were previously unconsolidated. Same store rental revenues increased 3.8% for the three months ended September 30, 2013, as compared to the same period in 2012, primarily due to three customers leasing approximately 0.6 million square feet during the period. Same store rental revenues increased 1.6% for the nine months ended September 30, 2013, as compared to the same period in 2012, as a result of additional rental revenue from three customers leasing approximately 0.6 million square feet during the period, which was partially offset by two customers vacating approximately 0.6 million square feet during the same period.

Rental Expenses.Rental expenses include certain expenses typically reimbursed by our customers, such as real estate taxes, property insurance, property management fees, repair and maintenance, and certain non-recoverable expenses, such as consulting services and

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roof repairs. Total rental expenses increased for the three and nine months ended September 30, 2013, as compared to the same periods in 2012, primarily due to an increase in non-same store rental expenses attributable to the significant increase in the number of buildings acquired compared to the same periods during 2012. Same store rental expenses increased by 9.5% and 10.2%, respectively, for the three and nine months ended September 30, 2013, as compared to the same periods in 2012, primarily due to expenses incurred for increased real estate taxes.

Other Income and Expenses.Other income and expenses increased for the three and nine months ended September 30, 2013, as compared to the same periods in 2012, primarily due to:

• a gain of approximately $26.5 million as a result of the acquisition of our partner’s interest in the Fund I Partnership joint venture;

• an increase in real estate-related depreciation and amortization expense resulting from the continued growth of our portfolio since September 30, 2012, as well as an increase in capital expenditures;

• an increase in acquisition-related expenses for the three and nine months ended September 30, 2013 primarily due to an increase in acquisition activity as compared to the same prior year periods;

• an increase in asset management fees as a result of the growth of our portfolio;

• an increase in interest expense primarily due to an increase in net borrowings of $1.0 billion since September 30, 2012, which was partially offset by a lower average interest rate of 3.28% as of September 30, 2013, as compared to 4.03% as of September 30, 2012; and

• incentive fee income of approximately $2.0 million as a result of the acquisition of our partner’s interest in the Fund I Partnership joint venture.

ADDITIONAL MEASURES OF PERFORMANCE

Net Operating Income (“NOI”)

We define NOI as GAAP rental revenues less GAAP rental expenses. For the three and nine months ended September 30, 2013, NOI was $48.3 million and $128.0 million, respectively, as compared to $26.5 million and $65.1 million, respectively, for the three and nine months ended September 30, 2012. We consider NOI to be an appropriate supplemental performance measure and believe NOI provides useful information to our investors regarding our financial condition and results of operations because NOI 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 properties, such as real estate-related depreciation and amortization, acquisition-related expenses, general and administrative expenses, and interest expense. However, NOI should not be viewed as an alternative measure of our financial performance since it excludes such 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. Therefore, we believe net loss, as defined by GAAP, to be the most appropriate measure to evaluate our overall performance. Refer to “Results of Operations” above for a reconciliation of our net loss to NOI for the three and nine months ended September 30, 2013 and 2012.

Funds from Operations (“FFO”) and Company-Defined FFO

We believe that FFO, Company-defined FFO, and MFFO, in addition to net 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 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-related 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 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.

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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 non-recurring acquisition-related costs (including acquisition fees paid to the Advisor) and a non-recurring loss from the early extinguishment of debt, each of which are characterized as expenses in determining net loss under GAAP. The purchase of operating properties is a key strategic objective of our business plan focused on generating on-going operating income and cash flow in order to make distributions to investors. However, as the corresponding acquisition-related costs are paid in cash, all paid and accrued acquisition-related costs negatively impact our operating performance and cash flows from operating activities during the period in which properties are acquired. In addition, if we acquire a property after all offering proceeds from our public offerings have been invested, there will not be any offering proceeds to pay the corresponding acquisition-related costs. Accordingly, unless the Advisor determines to waive the payment or reimbursement of these acquisition-related costs, then such costs will be paid from additional debt, operational earnings or cash flow, net proceeds from the sale of properties, or ancillary cash flows. As such, Company-defined FFO may not be a complete indicator of our operating performance, especially during periods in which properties are being acquired, 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.

MFFO.As defined by the Investment Program Association (“IPA”), MFFO is a non-GAAP supplemental financial performance measure used to evaluate our operating performance. Similar to FFO, MFFO excludes items such as real estate-related depreciation and amortization. Similar to Company-defined FFO, MFFO excludes acquisition-related costs and loss from the early extinguishment of debt. MFFO also excludes straight-line rent and amortization of above- and below-market leases. In addition, there are certain other MFFO adjustments as defined by the IPA that are not applicable to us and are not included in our presentation of MFFO.

We have been in the acquisition phase of our life cycle. Management does not include historical acquisition-related expenses in its evaluation of future operating performance, as such costs are not expected to be incurred once our acquisition phase is complete. In addition, management does not include a non-recurring loss from the early extinguishment of debt in its evaluation of future operating performance as the transaction that resulted in the loss was driven by factors relating to the capital markets, rather than factors specific to the on-going operating performance of our properties. We use Company-defined FFO and MFFO 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 exit strategies. We believe Company-defined FFO and MFFO facilitate a comparison to other REITs that are not engaged in 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 after the completion of the acquisition phase. However, these supplemental, non-GAAP measures are not necessarily indicative of future performance and should not be considered as an alternative to net 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 and MFFO. 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 and MFFO.

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The following unaudited table presents a reconciliation of FFO, Company-defined FFO and MFFO to net income (loss):

													For the Period
	For the Three Months						For the Nine Months						From Inception
	Ended September 30,						Ended September 30,						(May 19, 2009) to
(in thousands, except per share data)	2013			2012			2013			2012			September 30, 2013
Net income (loss)	$	14,147		$	(8,725	)	$	(10,982	)	$	(23,520	)	$	(80,994	)
Net income (loss) per common share	$	0.07		$	(0.08	)	$	(0.06	)	$	(0.25	)	$	(1.12	)
Reconciliation of net income (loss) to FFO:
Net income (loss)	$	14,147		$	(8,725	)	$	(10,982	)	$	(23,520	)	$	(80,994	)
Add (deduct) NAREIT-defined adjustments:
Real estate-related depreciation and amortization		31,025			16,446			84,909			40,547			169,446
Real estate-related depreciation and amortization of unconsolidated joint venture		1,310			1,723			4,468			4,898			12,946
Gain on acquisition of joint venture		(26,481	)		—			(26,481	)		—			(26,481	)
FFO	$	20,001		$	9,444		$	51,914		$	21,925		$	74,917
FFO per common share	$	0.10		$	0.08		$	0.30		$	0.23		$	1.03
Reconciliation of FFO to Company-defined FFO:
FFO	$	20,001		$	9,444		$	51,914		$	21,925		$	74,917
Add (deduct) Company-defined adjustments:
Acquisition costs		9,974			4,833			23,276			13,361			69,593
Acquisition costs of unconsolidated joint venture		784			54			863			476			3,133
Loss on early extinguishment of debt		—			874			—			874			837
Company-defined FFO	$	30,759		$	15,205		$	76,053		$	36,636		$	148,480
Company-defined FFO per common share	$	0.15		$	0.14		$	0.45		$	0.39		$	2.05
Reconciliation of Company-defined FFO to MFFO:
Company-defined FFO	$	30,759		$	15,205		$	76,053		$	36,636		$	148,480
Add (deduct) MFFO adjustments:
Straight-line rent and amortization of above/below market leases		(4,507	)		(943	)		(8,562	)		(2,777	)		(15,295	)
Straight-line rent and amortization of above/below market leases of unconsolidated joint venture		(795	)		(145	)		(1,612	)		(278	)		(2,123	)
MFFO	$	25,457		$	14,117		$	65,879		$	33,581		$	131,062
MFFO per common share	$	0.13		$	0.13		$	0.39		$	0.36		$	1.81
Weighted-average shares outstanding		203,024			111,996			170,474			94,484			72,540

We believe that: (i) our FFO of $20.0 million, or $0.10 per share, as compared to the distribution declared of $31.7 million, or $0.15625 per share, each for the three months ended September 30, 2013; (ii) our FFO of $51.9 million, or $0.30 per share, as compared to the distribution declared of $79.8 million, or $0.46875 per share, each for the nine months ended September 30, 2013; and (iii) our FFO of $74.9 million, or $1.03 per share, as compared to the distributions declared of $169.9 million, or $2.34375 per share, each for the period from Inception (May 19, 2009) to September 30, 2013, are not indicative of future performance as we have been in the acquisition phase of our life cycle. See “Capital Resources and Uses of Liquidity – Distributions” below for details concerning our distributions.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our principal uses of funds are and will continue to be for the acquisition of properties and other investments, operating expenses, distributions to our stockholders, payments under our debt obligations, and capital expenditures. Our primary sources of capital for meeting our cash requirements are: debt financings and cash flows generated by our real estate operations. We terminated the offering of primary shares pursuant to our Follow-On Offering on July 18, 2013, and accordingly, net proceeds from our Follow-On Offering will no longer be a primary source of capital for meeting our cash needs, as we have fully deployed the net proceeds from the sale of primary shares in the Follow-On Offering. Refer to “Note 7” of our condensed consolidated financial statements for further detail on the termination. Over time, we intend to fund a majority of our cash needs from funds provided by debt financings, cash flows generated from our operating properties, our joint venture partnerships, or dispositions. We expect to be able to repay our principal obligations over the next 12 months from operating cash flows and through refinancings.

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Now that our net proceeds have been fully deployed, another non-traded, public REIT, Industrial Property Trust Inc. (“IPT”), which is sponsored by an affiliate of our Sponsor, may have priority over us with regard to the acquisition of industrial properties. The Advisor, subject to the oversight of the board of directors and, under certain circumstances, the investment committee or other committees established by the board of directors, will evaluate potential acquisitions and dispositions, and will engage in negotiations with sellers, investors, and lenders on our behalf.

We believe that our cash on-hand, cash flows from operations, and anticipated financing and disposition activities will be sufficient to meet our liquidity needs for the foreseeable future.

Cash Flows.The following table summarizes our cash flows, as determined on a GAAP basis, for the following periods:

	For the Nine Months Ended September 30,
(in thousands)	2013			2012
Total cash provided by (used in):
Operating activities	$	54,727		$	16,125
Investing activities		(1,041,404	)		(736,906	)
Financing activities		989,778			723,504
Net increase in cash	$	3,101		$	2,723

Cash provided by operating activities during the nine months ended September 30, 2013 increased by $38.6 million as compared to the same period in 2012, primarily driven by the growth in performance of our real estate portfolio, which resulted in both an increase in net cash flows generated from our operating properties, as well as an increase in cash provided from net working capital sources.

Cash used in investing activities during the nine months ended September 30, 2013 increased by $304.5 million as compared to the same period in 2012, primarily due to an increase in our acquisition activity during the nine months ended September 30, 2013 as compared to the same prior year period, as well as an increase in capital expenditures.

Cash provided by financing activities during the nine months ended September 30, 2013 increased by $266.3 million as compared to the same period in 2012, primarily as a result of us raising additional capital from our Follow-On Offering and an increase in the level of our borrowings, partially offset by an increase in distributions paid during the nine months ended September 30, 2013.

Capital Resources and Uses of Liquidity

In addition to cash flows from operations and cash and cash equivalent balances available, our capital resources and uses of liquidity are as follows:

Lines of Credit.The secured revolving credit agreement we entered into in June 2011 was terminated on May 22, 2013. This secured revolving credit agreement had an initial aggregate commitment of $40.0 million, up to a maximum aggregate amount of $100.0 million, and was scheduled to mature in June 2013. There were no borrowings under this line of credit during 2013.

In August 2012, we entered into an unsecured revolving credit agreement with an initial aggregate commitment of $300.0 million, which was subsequently increased to $500.0 million in September 2013. We have the ability to expand the commitment up to a maximum aggregate amount of $600.0 million, subject to certain conditions. This line of credit matures in August 2015, and may be extended pursuant to two one-year extension options, subject to certain conditions. The primary interest rate is variable and calculated based on one-month LIBOR, plus a margin ranging from 1.75% to 2.50%. This line of credit is available for general corporate purposes including but not limited to the acquisition and operation of industrial properties and other permitted investments. As of September 30, 2013, we had $170.0 million outstanding under this line of credit; the unused portion was approximately $330.0 million, of which approximately $118.2 million was available.

In connection with the acquisition of our partner’s interest in the Fund I Partnership in September 2013, which is described in “Note 2” of our condensed consolidated financial statements, we assumed a secured line of credit agreement that has an initial aggregate commitment of $140.0 million, with the ability to expand the commitment up to a maximum aggregate amount of $300.0 million, subject to certain conditions. This line of credit matures in November 2014, and may be extended pursuant to two one-year extension options, subject to certain conditions. The interest rate is variable and calculated based on LIBOR, plus 2.25% to 2.75%. The line of credit is available to finance the acquisition and operation of collateral properties. Amounts under this line of credit become available when collateral properties are added to the loan agreement. As of September 30, 2013, we had $125.3 million outstanding under this line of credit. The unused portion was approximately $14.7 million, of which approximately $10.9 million was available.

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Unsecured Term Loans.In December 2012, we entered into a $200.0 million unsecured term loan facility, with the ability to increase the size of the unsecured term loan up to a total of $400.0 million, subject to certain conditions. The unsecured term loan requires monthly interest-only payments and has a maturity date of January 2018. The primary interest rate is variable and calculated based on one-month LIBOR, plus a margin ranging from 1.70% to 2.45%, depending on our consolidated leverage ratio. The unsecured term loan is available for general corporate purposes including, but not limited to the acquisition and operation of industrial properties and other permitted investments. As of September 30, 2013, there was $200.0 million outstanding with an interest rate of 1.88%.

In March 2013, we entered into LIBOR-based forward-starting interest rate swap agreements to hedge LIBOR on the unsecured term loan for a notional amount of $200.0 million. The forward-starting interest rate swaps have an effective date of January 14, 2014 and will fix LIBOR at 0.98%, with an all-in interest rate ranging from 2.68% to 3.43%, depending on our consolidated leverage ratio. The forward-starting interest rate swaps will expire on October 14, 2017. Refer to “Note 5” of our condensed consolidated financial statements for additional details relating to our interest rate swaps.

In September 2013, we entered into a $300.0 million unsecured term loan facility, with the ability to increase the size of the unsecured term loan up to a total of $500.0 million, subject to certain conditions. The unsecured term loan requires monthly interest-only payments and has a maturity date of January 2019. The primary interest rate is variable and calculated based on one-month LIBOR, plus a margin ranging from 1.50% to 2.35%, depending on our consolidated leverage ratio. The unsecured term loan is available for general corporate purposes, including but not limited to the acquisition and operation of industrial properties and other permitted investments. As of September 30, 2013, there was $300.0 million outstanding with an interest rate of 1.78%. Subsequent to September 30, 2013, we entered into LIBOR-based forward-starting interest rate swap agreements to hedge this unsecured term loan. See “Subsequent Events” below for additional detail.

Mortgage Note Financings.As of September 30, 2013, we had property-level borrowings of approximately $1.0 billion outstanding. These borrowings are secured by mortgages or deeds of trust and related assignments and security interests in the collateralized properties, and had a weighted-average interest rate of 4.25%, which includes the effect of an interest rate swap agreement. Refer to “Note 5” of our condensed consolidated financial statements for additional details relating to our interest rate swaps. The proceeds from the mortgage note financings were used to partially finance certain of our acquisitions, and can be used to finance our capital requirements, which may include the funding of future acquisitions, capital expenditures, distributions, and general corporate purposes.

Debt Covenants.Our mortgage notes, lines of credit, and unsecured term loans contain various property level covenants, including customary affirmative and negative covenants. In addition, the lines of credit contain certain corporate level financial covenants, including leverage ratio, fixed charge coverage ratio, and tangible net worth restrictions. These covenants may limit our ability to incur additional debt, make borrowings under our unsecured line of credit, or pay distributions. We were in compliance with all debt covenants as of September 30, 2013.

Offering Proceeds.As of September 30, 2013, the aggregate gross proceeds raised from our public offerings were approximately $2.1 billion ($1.9 billion net of direct selling costs).

Distributions. We intend to continue to make distributions on a quarterly basis. For the nine months ended September 30, 2013, 52% of our total distributions were paid from cash flows from operating activities, as determined on a GAAP basis, and 48% of our total distributions were funded from sources other than cash flows from operating activities, specifically with proceeds from the issuance of DRIP shares. Some or all of our future distributions may be paid from these sources, as well as from the sales of assets, cash resulting from a waiver or deferral of fees otherwise payable to the Advisor or its affiliates, and interest income from our cash balances. We have not established a cap on the amount of our distributions that may be paid from any of these sources. Distributions will be authorized at the discretion of our board of directors, and will depend on, among other things, current and projected cash requirements, tax considerations and other factors deemed relevant by our board. Our board of directors has authorized cash distributions at a quarterly rate of $0.15625 per share of common stock for the fourth quarter of 2013.

There can be no assurances that the current distribution rate or amount per share will be maintained. In the near-term, we expect that we may need to utilize cash flows from financing activities, as determined on a GAAP basis, to supplement the payment of cash distributions, which if insufficient could negatively impact our ability to pay distributions.

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The following table outlines sources used to pay distributions for the periods indicated below:

	Source of Distributions
($ in thousands)	Provided by Operating Activities (1)				Proceeds from Debt Financings (2)				Proceeds from Issuance of DRIP Shares (3)				Total Distributions
2013
September 30	$	15,939	50	%	$	—	—	%	$	15,786	50	%	$	31,725
June 30		13,457	52			—	—			12,516	48			25,973
March 31		11,782	53			—	—			10,323	47			22,105
Total	$	41,178	52	%	$	—	—	%	$	38,625	48	%	$	79,803
2012
December 31	$	10,554	54	%	$	—	—	%	$	9,014	46	%	$	19,568
September 30		9,124	52			284	2			8,089	46			17,497
June 30		5,147	33			3,288	21			7,287	46			15,722
March 31		1,854	17			4,283	39			4,902	44			11,039
Total	$	26,679	42	%	$	7,855	12	%	$	29,292	46	%	$	63,826

(1) Determined based on the current period’s cash flows from operating activities, plus any excess operating cash flows from previous periods, as determined on a GAAP basis.

(2) Our debt financings, or borrowings, are a component of cash provided by financing activities as determined on a GAAP basis.

(3) Stockholders may elect to have cash distributions reinvested in shares of our common stock through our distribution reinvestment plan. Participation in our distribution reinvestment plan has averaged approximately 47% of total distributions since inception.

Refer to “Note 7” of our condensed consolidated financial statements for further detail on distributions.

Redemptions. For the nine months ended September 30, 2013 and 2012, we received eligible redemption requests related to approximately 0.7 million and 0.3 million shares of our common stock, respectively, all of which we redeemed using cash flows from financing activities, for an aggregate amount of approximately $6.9 million, or an average price of $9.83 per share, and $3.3 million, or an average price of $9.68 per share, respectively. The aggregate amount expended for redemptions under our share redemption program is expected to be subject to certain caps and is not expected to exceed the aggregate proceeds received from the sale of shares pursuant to our distribution reinvestment plan. However, to the extent that the aggregate proceeds received from the sale of shares pursuant to our distribution reinvestment plan are not at a level sufficient to fund redemption requests, subject to a five percent limitation as discussed in Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds—Share Redemption Program,” our board of directors may, in its sole discretion, choose to use other sources of funds to redeem shares of our common stock. Such sources of funds could include cash on hand and cash available from borrowings, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders, debt repayment, and purchases of property investments. Our board of directors may, in its sole discretion, amend, suspend, or terminate the share redemption program at any time if it determines that the funds available to fund the share redemption program are needed for other business or operational purposes or that amendment, suspension, or termination of the share redemption program is in the best interests of our stockholders.

SUBSEQUENT EVENTS

Derivative Instruments

In October 2013, we entered into LIBOR-based forward-starting interest rate swap agreements to hedge LIBOR on the unsecured term loan for a notional amount of $300.0 million. The forward-starting interest rate swaps have an effective date of January 20, 2015 and will fix LIBOR at 1.81%, with an all-in interest rate ranging from 3.31% to 4.16%, depending on our consolidated leverage ratio. The forward-starting interest rate swaps will expire on October 20, 2018.

CONTRACTUAL OBLIGATIONS

A summary of future obligations as of December 31, 2012, was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on March 6, 2013 (“2012 Form 10-K”). Except as otherwise disclosed in “Note 5” of our condensed consolidated financial statements relating to our principal payments due on our debt for the next five years and thereafter, there were no material changes outside of the ordinary course of business.

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OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2013, we had no off-balance sheet arrangements that have or are reasonably likely to have a material effect, currently or in the future, on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

CRITICAL ACCOUNTING ESTIMATES

Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our unaudited condensed consolidated financial statements requires significant management judgments, assumptions, and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our condensed consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. For a detailed description of our critical accounting estimates, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2012 Form 10-K. As of September 30, 2013, our critical accounting estimates have not changed from those described in our 2012 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk is exposure to changes in interest rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows, and optimize overall borrowing costs. To achieve these objectives, we primarily borrow on a fixed interest rate basis for longer-term debt and utilize interest rate swap agreements on certain variable interest rate debt in order to limit the effects of changes in interest rates on our results of operations. As part of our risk management strategy, we enter into interest swap agreements with high-quality counterparties to manage the impact of variable interest rates on interest expense. As of September 30, 2013, our debt instruments were comprised of mortgage note financings, unsecured term loans, and borrowings under our lines of credit.

Fixed Interest Rate Debt.As of September 30, 2013, our consolidated fixed interest rate debt, either directly or through the use of interest rate swap agreements, represented 56% of our total consolidated debt and consisted of mortgage notes. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed interest rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes could affect the fair value of our fixed interest rate debt. As of September 30, 2013, the fair value and carrying value of our consolidated fixed rate debt was approximately $1.0 billion and $1.0 billion, respectively. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at September 30, 2013. As we expect to hold our fixed interest rate debt instruments to maturity, based on the underlying structure of the debt instrument, and that the amounts due under such instruments are limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that market fluctuations in interest rates, and the resulting change in fair value of our fixed interest rate debt instruments, would have a significant impact on our operating cash flows.

Variable Interest Rate Debt. As of September 30, 2013, our consolidated variable interest rate debt represented 44% of our total consolidated debt and consisted of borrowings under our lines of credit, our unsecured term loans, and a mortgage note. Interest rate changes in LIBOR could impact our future earnings and cash flows, but would not significantly affect the fair value of the variable interest rate debt instruments. As of September 30, 2013, we were exposed to market risks related to fluctuations in interest rates on approximately $804.4 million of aggregate consolidated borrowings. A hypothetical 10% change in the average interest rate on the outstanding balance of our variable interest rate debt as of September 30, 2013, would change our annual interest expense by approximately $394,000.

Derivative Instruments. As of September 30, 2013, we had four outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk, with a total notional amount of $207.6 million. See “Note 5” of our condensed consolidated financial statements for more information concerning our derivative instruments. In addition, subsequent to September 30, 2013, we entered into LIBOR-based forward-starting interest rate swap agreements to hedge our $300.0 million unsecured term loan. See “Subsequent Events” above for additional detail.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer and Treasurer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of September 30, 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer and Treasurer have concluded that, as of September 30, 2013, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, “Risk Factors” of our 2012 Form 10-K, which could materially affect our business, financial condition, and/or future results. The risks described in our 2012 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

There have been no material changes to the risk factors disclosed in our 2012 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Redemption Program

Per the terms of our amended and restated share redemption program (the “Amended SRP”), subject to certain restrictions and limitations, a stockholder may redeem shares of the Company’s common stock for cash at a price that may reflect a discount from the purchase price paid for the shares of common stock being redeemed. Shares of common stock must be held for a minimum of one year, subject to certain exceptions. The Company is not obligated to redeem shares of its common stock under the share redemption program. The Company presently limits the number of shares to be redeemed during any consecutive 12-month period to no more than five percent of the number of shares of common stock outstanding at the beginning of such 12-month period. The Company also limits redemptions in accordance with a quarterly cap.

After a stockholder has held shares of our common stock for a minimum of one year, our share redemption program may provide a limited opportunity for a stockholder to have its shares of common stock redeemed, subject to certain restrictions and limitations, at a price that may reflect a discount from the purchase price of the shares of our common stock being redeemed (the “Original Purchase Price”), and the amount of the discount (the “Holding Period Discount”) will vary based upon the length of time that a stockholder has held its shares of our common stock subject to redemption, as described in the table below (the “Holding Period Discount Table”), which has been posted on our website at www.industrialincome.com. Except as noted below, the redemption price (the “Redemption Price”) will be calculated by multiplying the Original Purchase Price by the applicable Holding Period Discount. Shares purchased through our distribution reinvestment plan, regardless of the offering in which they were purchased, will not be subject to the Holding Period Discount. With respect to shares of our common stock purchased pursuant to our initial public offering, including shares purchased through our distribution reinvestment plan pursuant to our initial public offering, the Redemption Price will be determined as described above, however the Original Purchase Price paid for such shares first will be increased by 4.0%, which is the amount by which the offering price increased between our initial public offering and our second public offering (the “Initial Offering Adjustment”) subject to the adjustments applicable to shares of common stock in connection with a redemption request with respect to the death of a stockholder, as described below.

Share Purchase Anniversary	Redemption Price as a Percentage of Original Purchase Price (as increased, if  applicable, by the Initial Offering Adjustment)
Less than one year		No redemption allowed
One year		92.5	%
Two years		95.0	%
Three years		97.5	%
Four years and longer		100.0	%

In the event that a stockholder seeks to redeem all of its shares of our common stock, shares of our common stock purchased pursuant to our distribution reinvestment plan may be excluded from the foregoing one-year holding period requirement, in the discretion of our board of directors. If a stockholder has made more than one purchase of our common stock (other than through our distribution reinvestment plan), the one-year holding period will be calculated separately with respect to each such purchase. In addition, for purposes of the one-year holding period, holders of OP Units who exchange their OP Units for shares of our common stock shall be deemed to have owned their shares as of the date they were issued their OP Units. Neither the one-year holding period nor the Redemption Caps (as defined in the Amended SRP) will apply in the event of the death of a stockholder; provided, however, that any such redemption request with respect to the death of a stockholder must be submitted to us within 18 months after the date of death, as further described in the share redemption plan. Shares of common stock subject to a redemption request with respect to the death of a stockholder will be redeemed at a price equal to (i) with respect to shares purchased in our second public offering, 100% of the Original Purchase Price paid by the deceased stockholder for the shares without application of the Holding Period Discount, and (ii) with respect to shares purchased in our initial public offering, the greater of (x) 100% of the Original Purchase Price paid by the

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deceased stockholder for the shares, without application of the Initial Offering Adjustment or the Holding Period Discount and (y) the Redemption Price determined as described in the paragraph preceding the Holding Period Discount Table, including application of the Initial Offering Adjustment and the Holding Period Discount. Our board of directors reserves the right in its sole discretion at any time and from time to time to (a) waive the one-year holding period and either of the Redemption Caps (defined in the Amended SRP) in the event of the disability (as such term is defined in Section 72(m)(7) of the Internal Revenue Code) of a stockholder, (b) reject any request for redemption for any reason, or (c) reduce the number of shares of our common stock allowed to be redeemed under the share redemption program. A stockholder’s request for redemption in reliance on any of the waivers that may be granted in the event of the disability of the stockholder must be submitted within 18 months of the initial determination of the stockholder’s disability, as further described in the Amended SRP. If our board of directors waives the one-year holding period in the event of the disability of a stockholder, such stockholder will have its shares redeemed as described in the paragraph preceding the Holding Period Discount Table as though the stockholder has held its shares for one year, including application of the Initial Offering Adjustment (if applicable) and the Holding Period Discount. In all other cases in the event of the disability of a stockholder, such stockholder will have its shares redeemed as described in the paragraph preceding the Holding Period Discount Table. Furthermore, any shares redeemed in excess of the Quarterly Redemption Cap (as defined in the Amended SRP) as a result of the death or disability of a stockholder will be included in calculating the following quarter’s redemption limitations. At any time we are engaged in an offering of shares of our common stock, the per share price for shares of our common stock redeemed under our redemption program will never be greater than the then-current offering price of our shares of our common stock sold in the primary offering. The above description of the Amended SRP is a summary of certain of the terms of the Amended SRP. Please see the full text of the Amended SRP, which is incorporated by reference as Exhibit 4.2 to this Quarterly Report on Form 10-Q, for all the terms and conditions of the Amended SRP.

For the nine months ended September 30, 2013 and 2012, we received eligible redemption requests related to approximately 0.7 million and 0.3 million shares of our common stock, respectively, all of which we redeemed using cash flows from financing activities, for an aggregate amount of approximately $6.9 million, or an average price of $9.83 per share, and $3.3 million, or an average price of $9.68 per share, respectively.

The table below summarizes the redemption activity for the three months ended September 30, 2013:

For the Month Ended	Total Number of Shares Redeemed		Average Price Paid per Share		Total Number of Shares Redeemed as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Redeemed Under the Plans or  Programs (1)
July 31, 2013		—	$	—		—		—
August 31, 2013		—		—		—		—
September 30, 2013		270,130		9.90		270,130		—
Total		270,130	$	9.90		270,130		—

(1) We limit the number of shares that may be redeemed under the program as described above.

ITEM 6. EXHIBITS

The exhibits required by this item are set forth on the Exhibit Index attached hereto.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INDUSTRIAL INCOME TRUST INC.
November 13, 2013	By:	/s/    DWIGHT L. MERRIMAN III
		Dwight L. Merriman III
		Chief Executive Officer
November 13, 2013	By:	/s/    THOMAS G. MCGONAGLE
		Thomas G. McGonagle
		Chief Financial Officer and Treasurer

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EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
3.1	Second Articles of Amendment and Restatement of Industrial Income Trust Inc., dated February 9, 2010. Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed with the SEC on March 26, 2010.
3.2	Bylaws of Industrial Income Trust Inc. Incorporated by reference to Exhibit 3.2 to Pre-effective Amendment No. 4 to the Issuer’s Registration Statement on Form S-11 (File No. 333-159445) filed with the SEC on December 17, 2009.
4.1	Second Amended and Restated Distribution Reinvestment Plan. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on February 27, 2012.
4.2	Third Amended and Restated Share Redemption Program effective as of June 1, 2012. Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on February 27, 2012.
10.1*	Limited Partnership Interest Purchase Agreement by and among 3NET Indy Investments Inc., IIT North American Industrial Fund I Limited Partner LLC, solely for purposes of Sections 2.01(c)(iii) and 6.02, Public Sector Pension Investment Board, and solely for purposes of Sections 2.01(c)(iii), 5.02, and 6.03, IIT North American Industrial Fund I Limited Partnership, dated as of September 17, 2013.
10.2*	Term Loan Agreement, dated as of September 18, 2013, among Industrial Income Operating Partnership LP, a Delaware limited partnership, as the Borrower; Bank of America, N.A., as Administrative Agent; Regions Bank, as Syndication Agent; JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association, as Co-Documentation Agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Regions Capital Markets, as Joint Lead Arrangers and Joint Bookrunners.
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from Industrial Income Trust Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, filed on November 13, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statement of Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements

* Filed herewith.

* Furnished herewith.

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