Exhibit 99.1
Table of Contents
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The following supplements Industrial Income Trust Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, as filed with the Securities and Exchange Commission (the “SEC”) on August 11, 2014, which is available atwww.industrialincome.com. As used herein, the terms “IIT,” the “Company,” “we,” “our,” or “us” refer to Industrial Income Trust Inc.
Overview | 2 | |||
Quarterly Highlights | 3 | |||
Consolidated Statements of Operations | 4 | |||
Consolidated Balance Sheets | 5 | |||
Consolidated Statements of Cash Flows | 6 | |||
Funds from Operations | 7 | |||
Selected Financial Data | 8 | |||
Portfolio Overview | 9 | |||
Lease Expirations & Top Customers | 11 | |||
Acquisitions / Dispositions Summary | 12 | |||
Development Overview | 13 | |||
Debt | 14 | |||
Definitions | 15 | |||
This supplemental information contains forward-looking statements that are based on IIT’s current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties, including, without limitation, the failure of acquisitions to perform as IIT expects, IIT’s ability to successfully integrate acquired properties and operations and otherwise execute on its investment strategy, the availability of affordable financing, the availability of cash flows from operating activities for distributions and capital expenditures and those risks set forth in the “Risk Factors” section of IIT’s Annual Report on Form 10-K for the year ended December 31, 2013, as amended or supplemented by the Company’s other filings with the SEC. Any of these statements could prove to be inaccurate, and actual events or IIT’s investments and results of operations could differ materially from those expressed or implied. To the extent that IIT’s assumptions differ from actual results, IIT’s ability to meet such forward-looking statements, including its ability to consummate additional acquisitions and financings, to invest in a diversified portfolio of quality real estate investments, and to generate attractive returns for investors, may be significantly hindered. You are cautioned not to place undue reliance on any forward-looking statements. IIT cannot assure you that it will attain its investment objectives.
The cover page is of Buckeye Distribution Center, which consists of two buildings totaling 684,000 square feet located in the Phoenix market.
Second Quarter 2014 Supplemental Reporting Package |
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Page 1 |
Overview
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IIT is a leading, national industrial real estate investment trust that selectively acquires, develops, and operateshigh-quality distribution warehouses located in key U.S. logistics centers serving corporate customers. IIT’s core strategy has been to build a national platform of institutional quality industrial properties by targeting markets that have high barriers to entry, proximity to a large demographic base, and/or access to major distribution infrastructure. IIT acquired its first building in June 2010.
As of June 30, 2014, IIT owned and managed a consolidated portfolio that included 281 industrial buildings totaling approximately 55.9 million square feet in 19 major industrial markets throughout the U.S. with 533 customers that had a weighted-average remaining lease term (based on square feet) of 5.0 years. Of the 281 industrial buildings we owned and managed as of June 30, 2014:
| • | 269 industrial buildings totaling approximately 53.2 million square feet comprised our operating portfolio, which was 93% occupied (94% leased) and included one industrial building classified as held for sale. |
| • | 12 industrial buildings totaling approximately 2.7 million square feet comprised our development portfolio. |
Public Earnings Call
We will host a public conference call on Tuesday, August 26, 2014 to review quarterly operating and financial results for the quarter ended June 30, 2014. Dwight Merriman, Chief Executive Officer, and Tom McGonagle, Chief Financial Officer, will present operating and financial data and discuss the Company’s corporate strategy and acquisition, disposition and development activity. The conference call will take place at 2:15 p.m. MDT and can be accessed by dialing (800) 381-7839. To access a replay of the call, contact Dividend Capital at (866) 324-7348.
Contact Information
Industrial Income Trust Inc.
518 Seventeenth Street, 17th Floor
Denver, Colorado 80202
Telephone: (303) 228-2200
Attn: Thomas G. McGonagle, Chief Financial Officer
Second Quarter 2014 Supplemental Reporting Package |
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Quarterly Highlights
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The following is an overview of our financial and operating results for the quarter ended June 30, 2014:
| • | As of June 30, 2014, we had 281 consolidated buildings aggregating 55.9 million square feet as compared to 243 consolidated buildings aggregating 44.6 million square feet as of June 30, 2013. |
| • | During the quarter ended June 30, 2014, we leased approximately 2.5 million square feet, which included 1.4 million square feet of new leases and expansions, and 1.1 million square feet of renewals and future leases. Future leases represent new leases for units that are entered into while the units are occupied by the current customer. |
| • | In April 2014, we sold 20 industrial buildings aggregating 2.8 million square feet for net proceeds of $125.3 million and recognized gains of $24.5 million. All of these buildings were previously classified as held for sale. |
| • | Our net operating income(1) was $57.5 million for the quarter ended June 30, 2014, as compared to net operating income of $41.6 million for the same period in 2013. |
| • | Our same store net operating income(1) was $37.3 million for the quarter ended June 30, 2014, as compared to $36.1 million for the same period in 2013. |
| • | Our net income was $20.4 million, or $0.10 per share, for the quarter ended June 30, 2014. This compares to a net loss of $14.2 million, or $0.09 per share, for the same period in 2013. These results include: (i) gain on sale of real estate properties of $24.5 million for the quarter ended June 30, 2014; and (ii) non-recurring acquisition-related expenses of $1.5 million for the quarter ended June 30, 2014, and $10.6 million for the same period in 2013. |
| • | We had Company-defined Funds from Operations (“Company-Defined FFO”)(2) of $32.7 million, or $0.16 per share, for the quarter ended June 30, 2014, as compared to $24.3 million, or $0.15 per share, for the same period in 2013. |
Our operating results for the quarters ended June 30, 2014 and 2013 are not directly comparable, as we were in the acquisition phase of our life cycle during 2013, and as such, the results of our operations were significantly impacted by the timing of our acquisitions and the equity raised through our public offerings.
| (1) | See “Selected Financial Data” for additional information regarding net operating income and same store net operating income, as well as “Definitions” for a reconciliation of net operating income to GAAP net income (loss). |
| (2) | See “Funds from Operations” for a reconciliation of GAAP net income (loss) to Company-defined FFO, as well as “Definitions” for additional information. |
Second Quarter 2014 Supplemental Reporting Package |
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Consolidated Statements of Operations
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| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
(in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues: | ||||||||||||||||
Rental revenues | $ | 76,866 | $ | 55,302 | $ | 158,403 | $ | 106,556 | ||||||||
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Total revenues | 76,866 | 55,302 | 158,403 | 106,556 | ||||||||||||
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Operating expenses: | ||||||||||||||||
Rental expenses | 19,407 | 13,715 | 42,652 | 26,798 | ||||||||||||
Real estate-related depreciation and amortization | 35,244 | 26,602 | 72,860 | 53,884 | ||||||||||||
General and administrative expenses | 1,886 | 1,792 | 3,684 | 3,453 | ||||||||||||
Asset management fees, related party | 7,314 | 5,222 | 14,636 | 9,754 | ||||||||||||
Acquisition-related expenses, related party | 1,543 | 4,376 | 1,742 | 5,334 | ||||||||||||
Acquisition-related expenses | - | 6,197 | 354 | 7,968 | ||||||||||||
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Total operating expenses | 65,394 | 57,904 | 135,928 | 107,191 | ||||||||||||
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Operating income (loss) | 11,472 | (2,602) | 22,475 | (635) | ||||||||||||
Other income (expenses): | ||||||||||||||||
Equity in loss of unconsolidated joint ventures | (9) | (170) | (30) | (1,456) | ||||||||||||
Interest expense and other | (15,513) | (11,440) | (31,310) | (23,038) | ||||||||||||
Gain on disposition of real estate properties | 24,471 | - | 24,471 | - | ||||||||||||
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Total other income (expenses) | 8,949 | (11,610) | (6,869) | (24,494) | ||||||||||||
Net income (loss) | 20,421 | (14,212) | 15,606 | (25,129) | ||||||||||||
Net income (loss) attributable to noncontrolling interests | - | - | - | - | ||||||||||||
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Net income (loss) attributable to common stockholders | $ | 20,421 | $ | (14,212) | $ | 15,606 | $ | (25,129) | ||||||||
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Weighted-average shares outstanding | 209,419 | 166,255 | 208,780 | 153,938 | ||||||||||||
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Net income (loss) per common share - basic and diluted | $ | 0.10 | $ | (0.09) | $ | 0.07 | $ | (0.16) | ||||||||
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Second Quarter 2014 Supplemental Reporting Package |
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Consolidated Balance Sheets
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(in thousands) | June 30, 2014 | December 31, 2013 | ||||||
ASSETS | ||||||||
Net investment in real estate properties | $ | 3,460,132 | $ | 3,499,570 | ||||
Investment in unconsolidated joint ventures | 8,118 | 8,066 | ||||||
Cash and cash equivalents | 6,976 | 18,358 | ||||||
Restricted cash | 2,948 | 2,813 | ||||||
Straight-line rent receivable | 36,272 | 28,614 | ||||||
Tenant receivables, net | 4,648 | 5,497 | ||||||
Notes receivable | 3,612 | 3,612 | ||||||
Deferred financing costs, net | 10,543 | 11,543 | ||||||
Deferred acquisition costs | 55,397 | 25,390 | ||||||
Other assets | 2,859 | 10,601 | ||||||
Assets held for sale | 1,285 | - | ||||||
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Total assets | $ | 3,592,790 | $ | 3,614,064 | ||||
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LIABILITIES AND EQUITY | ||||||||
Accounts payable and accrued expenses | $ | 33,917 | $ | 35,789 | ||||
Tenant prepaids and security deposits | 36,677 | 44,719 | ||||||
Intangible lease liability, net | 28,589 | 31,858 | ||||||
Debt | 1,897,593 | 1,876,631 | ||||||
Distributions payable | 32,706 | 32,301 | ||||||
Other liabilities | 4,394 | 684 | ||||||
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Total liabilities | 2,033,876 | 2,021,982 | ||||||
Total stockholders’ equity | 1,558,913 | 1,592,081 | ||||||
Noncontrolling interests | 1 | 1 | ||||||
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Total liabilities and equity | $ | 3,592,790 | $ | 3,614,064 | ||||
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Shares outstanding |
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209,116 |
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206,743 |
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Second Quarter 2014 Supplemental Reporting Package |
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Consolidated Statements of Cash Flows
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| For the Six Months | ||||||||
| Ended June 30, | ||||||||
($ in thousands) | 2014 | 2013 | ||||||
Operating activities: | ||||||||
Net income (loss) | $ | 15,606 | $ | (25,129) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Real estate-related depreciation and amortization | 72,860 | 53,884 | ||||||
Equity in loss of unconsolidated joint ventures | 30 | 1,456 | ||||||
Gain on disposition of real estate properties | (24,471) | - | ||||||
Straight-line rent and amortization of above- and below-market leases | (6,975) | (4,055) | ||||||
Other | 1,106 | 1,186 | ||||||
Changes in operating assets and liabilities | (7,352) | 17,036 | ||||||
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Net cash provided by operating activities | 50,804 | 44,378 | ||||||
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Investing activities: | ||||||||
Real estate acquisitions | (72,054) | (523,979) | ||||||
Acquisition deposits | (43,181) | (3,975) | ||||||
Capital expenditures and development activities | (51,261) | (27,169) | ||||||
Investments in unconsolidated joint ventures | - | (8,413) | ||||||
Proceeds from dispostion of real estate properties | 125,310 | - | ||||||
Other | (47) | (132) | ||||||
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Net cash used in investing activities | (41,233) | (563,668) | ||||||
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Financing activities: | ||||||||
Repayments of mortgage notes | (3,185) | (1,485) | ||||||
Proceeds from lines of credit | 115,000 | 235,000 | ||||||
Repayments of lines of credit | (90,000) | (140,000) | ||||||
Proceeds from issuance of common stock | - | 498,361 | ||||||
Offering costs for issuance of common stock | (638) | (45,154) | ||||||
Distributions paid to common stockholders | (32,515) | (22,336) | ||||||
Redemptions of common stock | (9,085) | (6,918) | ||||||
Other | (530) | (234) | ||||||
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Net cash (used in) provided by financing activities | (20,953) | 517,234 | ||||||
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Net decrease in cash and cash equivalents | (11,382) | (2,056) | ||||||
Cash and cash equivalents, at beginning of period | 18,358 | 24,550 | ||||||
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Cash and cash equivalents, at end of period | $ | 6,976 | $ | 22,494 | ||||
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Second Quarter 2014 Supplemental Reporting Package |
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Funds from Operations(1)
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Our second quarter 2014 Company-defined FFO was $0.16 per share, as compared to $0.15 per share for the second quarter 2013. There can be no assurances that the current level of Company-defined FFO will be maintained.
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
(in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income (loss) | $ | 20,421 | $ | (14,212) | $ | 15,606 | $ | (25,129) | ||||||||
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Net income (loss) per common share | $ | 0.10 | $ | (0.09) | $ | 0.07 | $ | (0.16) | ||||||||
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Reconciliation of net income (loss) to FFO: | ||||||||||||||||
Net income (loss) | $ | 20,421 | $ | (14,212) | $ | 15,606 | $ | (25,129) | ||||||||
Add (deduct) NAREIT-defined adjustments: | ||||||||||||||||
Real estate-related depreciation and amortization | 35,244 | 26,602 | 72,860 | 53,884 | ||||||||||||
Real estate-related depreciation and amortization of unconsolidated joint ventures | - | 1,298 | 9 | 3,158 | ||||||||||||
Gain on disposition of real estate properties | (24,471) | - | (24,471) | - | ||||||||||||
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FFO | $ | 31,194 | $ | 13,688 | $ | 64,004 | $ | 31,913 | ||||||||
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FFO per common share | $ | 0.15 | $ | 0.08 | $ | 0.31 | $ | 0.21 | ||||||||
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Reconciliation of FFO to Company-defined FFO: | ||||||||||||||||
FFO | $ | 31,194 | $ | 13,688 | $ | 64,004 | $ | 31,913 | ||||||||
Add (deduct) Company-defined adjustments: | ||||||||||||||||
Acquisition costs | 1,543 | 10,573 | 2,096 | 13,302 | ||||||||||||
Acquisition costs of unconsolidated joint ventures | - | 21 | - | 79 | ||||||||||||
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Company-defined FFO | $ | 32,737 | $ | 24,282 | $ | 66,100 | $ | 45,294 | ||||||||
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Company-defined FFO per common share | $ | 0.16 | $ | 0.15 | $ | 0.32 | $ | 0.29 | ||||||||
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Weighted-average shares outstanding | 209,419 | 166,255 | 208,780 | 153,938 | ||||||||||||
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| (1) | See “Definitions” for additional information regarding Funds from Operations (“FFO”) and Company-defined FFO. |
Second Quarter 2014 Supplemental Reporting Package |
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Page 7 |
Selected Financial Data
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The following table presents selected consolidated financial information, which has been derived from our consolidated financial statements. The information presented below is only a summary and does not provide all of the information contained in our historical consolidated financial statements, including the related notes thereto, and as such, you should read it in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014. The same store operating portfolio for the three months ended June 30, 2014 and 2013 included 178 buildings owned as of April 1, 2013, and represented 63% of total rentable square feet or 65% of total revenues as of June 30, 2014. The same store operating portfolio for the six months ended June 30, 2014 and 2013 included 171 buildings owned as of January 1, 2013, and represented 60% of total rentable square feet or 62% of total revenues as of June 30, 2014.
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
($ in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Operating data: | ||||||||||||||||
Rental revenues from same store operating properties(1) | $ | 49,954 | $ | 48,234 | $ | 97,912 | $ | 94,118 | ||||||||
Rental revenues from other properties(1) | 26,912 | 7,068 | 60,491 | 12,438 | ||||||||||||
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Total rental revenues | 76,866 | 55,302 | 158,403 | 106,556 | ||||||||||||
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Rental expenses from same store operating properties(1) | 12,644 | 12,181 | 26,488 | 23,774 | ||||||||||||
Rental expenses from other properties(1) | 6,763 | 1,534 | 16,164 | 3,024 | ||||||||||||
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Total rental expenses | 19,407 | 13,715 | 42,652 | 26,798 | ||||||||||||
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NOI from same store operating properties | 37,310 | 36,053 | 71,424 | 70,344 | ||||||||||||
NOI from other properties | 20,149 | 5,534 | 44,327 | 9,414 | ||||||||||||
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Total NOI(2) | $ | 57,459 | $ | 41,587 | $ | 115,751 | $ | 79,758 | ||||||||
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Less straight-line rents | $ | (4,025) | $ | (3,648) | $ | (9,050) | $ | (5,930) | ||||||||
Plus amortization of above market leases, net | 654 | 820 | 2,075 | 1,875 | ||||||||||||
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Cash NOI(2) | $ | 54,088 | $ | 38,759 | $ | 108,776 | $ | 75,703 | ||||||||
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Adjusted EBITDA(3) | $ | 48,571 | $ | 36,701 | $ | 97,763 | $ | 70,348 | ||||||||
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Distributions: | ||||||||||||||||
Total distributions declared | $ | 32,706 | $ | 25,973 | $ | 65,221 | $ | 48,078 | ||||||||
Distributions declared per common share | $ | 0.15625 | $ | 0.15625 | $ | 0.31250 | $ | 0.31250 | ||||||||
Cash flow data: | ||||||||||||||||
Net cash provided by operating activities | $ | 30,794 | $ | 27,044 | $ | 50,804 | $ | 44,378 | ||||||||
Net cash provided (used in) by investing activities | $ | 3,079 | $ | (455,893) | $ | (41,233) | $ | (563,668) | ||||||||
Net cash (used in) provided by financing activities | $ | (42,682) | $ | 418,368 | $ | (20,953) | $ | 517,234 | ||||||||
Capital expenditures: | ||||||||||||||||
Development activity | $ | 21,813 | $ | 15,318 | $ | 33,887 | $ | 16,708 | ||||||||
Tenant improvements and leasing commissions | $ | 5,507 | $ | 4,404 | $ | 13,125 | $ | 8,498 | ||||||||
Property maintenance and improvements | $ | 2,893 | $ | 1,521 | $ | 4,249 | $ | 1,963 | ||||||||
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Total capital expenditures | $ | 30,213 | $ | 21,243 | $ | 51,261 | $ | 27,169 | ||||||||
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| (1) | See “Definitions” for additional information regarding “same store operating properties” and “other properties.” |
| (2) | See “Definitions” for a reconciliation of net operating income to GAAP net income (loss) and for a reconciliation of cash net operating income to GAAP net income (loss). |
| (3) | See “Definitions” for a reconciliation of adjusted EBITDA to GAAP net income (loss). |
Second Quarter 2014 Supplemental Reporting Package |
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Page 8 |
Portfolio Overview
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Our portfolio consists primarily of quality, functional industrial buildings with generic features designed for operating flexibility and for high acceptance by a wide range of customers. As of June 30, 2014, the weighted-average age of our buildings (based on square feet) was 13.7 years.
Portfolio Data
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| June 30, | December 31, | June 30, | ||||||||||
(square feet in thousands) | 2014 | 2013 | 2013 | |||||||||
Number of consolidated buildings(1) | 281 | 296 | 243 | |||||||||
Number of unconsolidated buildings (2) | 2 | 1 | 30 | |||||||||
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Total number of buildings | 283 | 297 | 273 | |||||||||
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Rentable square feet of consolidated buildings(1) | 55,859 | 57,230 | 44,636 | |||||||||
Rentable square feet of unconsolidated buildings(2) | 710 | 180 | 6,367 | |||||||||
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Total rentable square feet | 56,569 | 57,410 | 51,003 | |||||||||
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Total number of customers | 533 | 553 | 527 | |||||||||
Percent occupied of operating portfolio | 93% | 94% | 92% | |||||||||
Percent occupied of total portfolio | 89% | 91% | 91% | |||||||||
Percent leased of operating portfolio | 94% | 95% | 93% | |||||||||
Percent leased of total portfolio | 91% | 93% | 93% | |||||||||
Markets by Total Rentable Square Feet
as of June 30, 2014
| (1) | Includes one building classified as held for sale as of June 30, 2014. |
| (2) | In September 2013, we acquired our partner’s equity interest in the Fund I Partnership joint venture. As of the date of the acquisition, the Fund I Partnership included 31 buildings aggregating approximately 7.2 million square feet. |
Second Quarter 2014 Supplemental Reporting Package |
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Portfolio Overview
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As of June 30, 2014, we owned and managed a well-diversified industrial portfolio located in 19 major industrial markets throughout the U.S. Approximately 72% (based on square feet) and 73% (based on annual base rent) of our total portfolio was located in our top-tier industrial markets(1).
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($ and square feet in thousands) | Buildings | Feet | Rate | Rate | Base Rent | Base Rent | ||||||||||||||||||
Operating Properties: | ||||||||||||||||||||||||
Atlanta | 19 | 4,905 | 86.0 % | 92.1 % | $ | 13,960 | 6.1 % | |||||||||||||||||
Austin | 7 | 748 | 90.6 | 97.4 | 4,269 | 1.9 | ||||||||||||||||||
Baltimore / D.C. | 24 | 4,550 | 95.8 | 95.8 | 21,637 | 9.4 | ||||||||||||||||||
Chicago | 19 | 3,967 | 90.7 | 90.7 | 16,125 | 7.0 | ||||||||||||||||||
Dallas | 23 | 3,218 | 97.2 | 97.2 | 13,043 | 5.7 | ||||||||||||||||||
Denver | 1 | 554 | 100.0 | 100.0 | 3,348 | 1.5 | ||||||||||||||||||
Houston | 27 | 2,803 | 88.6 | 88.6 | 13,077 | 5.7 | ||||||||||||||||||
Indianapolis | 7 | 2,698 | 92.9 | 92.9 | 11,494 | 5.0 | ||||||||||||||||||
Memphis | 6 | 2,176 | 89.3 | 89.3 | 5,541 | 2.4 | ||||||||||||||||||
Nashville | 6 | 2,531 | 100.0 | 100.0 | 8,499 | 3.7 | ||||||||||||||||||
New Jersey | 12 | 2,182 | 91.1 | 92.4 | 10,424 | 4.5 | ||||||||||||||||||
Pennsylvania | 29 | 5,248 | 96.1 | 96.1 | 22,489 | 9.8 | ||||||||||||||||||
Phoenix | 17 | 4,646 | 83.1 | 83.1 | 20,188 | 8.8 | ||||||||||||||||||
Portland | 8 | 948 | 88.1 | 89.5 | 4,111 | 1.8 | ||||||||||||||||||
Salt Lake City | 4 | 1,140 | 97.9 | 100.0 | 5,337 | 2.3 | ||||||||||||||||||
San Francisco Bay Area | 8 | 1,171 | 94.7 | 94.7 | 6,350 | 2.8 | ||||||||||||||||||
Seattle / Tacoma | 10 | 1,950 | 96.1 | 99.7 | 10,488 | 4.6 | ||||||||||||||||||
South Florida | 21 | 1,793 | 97.7 | 97.7 | 12,287 | 5.4 | ||||||||||||||||||
Southern California | 21 | 5,936 | 99.9 | 99.9 | 24,921 | 10.9 | ||||||||||||||||||
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Total Operating Properties | 269 | 53,164 | 93.1 | 94.0 | 227,588 | 99.3 | ||||||||||||||||||
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Development Properties: | ||||||||||||||||||||||||
Houston | 3 | 537 | 7.1 | 7.1 | - | - | ||||||||||||||||||
New Jersey | 5 | 546 | 43.4 | 54.2 | 1,709 | 0.7 | ||||||||||||||||||
Salt Lake City | 1 | 416 | - | - | - | - | ||||||||||||||||||
Southern California | 3 | 1,196 | - | 43.5 | - | - | ||||||||||||||||||
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Total Development Properties | 12 | 2,695 | 10.2 | 31.7 | 1,709 | 0.7 | ||||||||||||||||||
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Total Portfolio | 281 | 55,859 | 89.1 % | 91.0 % | $ | 229,297 | 100.0 % | |||||||||||||||||
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| (1) | Our top-tier industrial markets include: Atlanta, Baltimore / D.C., Chicago, Dallas, Houston, New Jersey, Pennsylvania, San Francisco Bay Area, Seattle / Tacoma, South Florida and Southern California. |
Second Quarter 2014 Supplemental Reporting Package |
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Page 10 |
Lease Expirations & Top Customers
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As of June 30, 2014, our consolidated real estate portfolio consisted of 281 industrial buildings occupied by 533 customers with 577 leases.
Lease Expirations
During the second quarter of 2014, we leased approximately 2.5 million square feet, which included 1.4 million square feet of new leases and expansions and 1.1 million square feet of renewals and future leases. Future leases represent new leases for units that are entered into while the units are occupied by the current customer. Expansions represented approximately 2.6% of the total leasing activity for the quarter ended June 30, 2014.
| Percent | Percent | |||||||||||||||||
| Number | of Total | of Total | ||||||||||||||||
| of | Occupied | Occupied | Annualized | Annualized | ||||||||||||||
($ and square feet in thousands) | Leases | Square Feet | Square Feet | Base Rent | Base Rent | |||||||||||||
Remainder of 2014(1) | 40 | 2,687 | 5.4 % | $ | 12,740 | 5.6 % | ||||||||||||
2015 | 106 | 5,232 | 10.5 | 25,254 | 11.0 | |||||||||||||
2016 | 95 | 5,885 | 11.8 | 28,036 | 12.2 | |||||||||||||
2017 | 96 | 5,286 | 10.6 | 24,307 | 10.6 | |||||||||||||
2018 | 73 | 7,903 | 15.9 | 34,906 | 15.2 | |||||||||||||
2019 | 55 | 5,405 | 10.9 | 25,549 | 11.2 | |||||||||||||
2020 | 29 | 3,037 | 6.1 | 13,281 | 5.8 | |||||||||||||
2021 | 24 | 3,888 | 7.8 | 19,799 | 8.6 | |||||||||||||
2022 | 20 | 3,910 | 7.8 | 17,896 | 7.8 | |||||||||||||
2023 | 12 | 1,226 | 2.5 | 4,740 | 2.1 | |||||||||||||
Thereafter | 27 | 5,323 | 10.7 | 22,789 | 9.9 | |||||||||||||
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Total occupied | 577 | 49,782 | 100.0 % | $ | 229,297 | 100.0 % | ||||||||||||
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Customers
Of the 533 customers as of June 30, 2014, there were no customers that individually represented more than 10% of total annualized base rent or total occupied square feet. The following table reflects our 10 largest customers, based on annualized base rent, which occupied a combined 10.9 million square feet as of June 30, 2014:
| Percent of Total | Percent of Total | |||||||
| Annualized | Occupied | |||||||
Customer | Base Rent | Square Feet | ||||||
Amazon.com, LLC | 6.0 % | 5.0 % | ||||||
Home Depot USA INC. | 3.6 | 3.9 | ||||||
Hanesbrands, Inc. | 2.7 | 2.6 | ||||||
Belkin International | 2.3 | 1.6 | ||||||
CEVA Logistics U.S. | 2.3 | 2.9 | ||||||
U.S. Government | 1.6 | 1.1 | ||||||
GlaxoSmithKlein | 1.5 | 1.3 | ||||||
United Natural Foods, Inc. | 1.5 | 1.1 | ||||||
FedEx | 1.2 | 0.9 | ||||||
Harbor Freight Tools | 1.1 | 1.6 | ||||||
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Total | 23.8 % | 22.0 % | ||||||
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| (1) | Includes month-to-month leases. |
Second Quarter 2014 Supplemental Reporting Package |
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Page 11 |
Acquisitions / Dispositions / Development Summary
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Acquisitions
During the second quarter of 2014, we acquired four buildings totaling 1.0 million square feet for a purchase price of approximately $66.2 million.
As of June 30, 2014, the Company’s aggregate gross investment in properties was approximately $3.7 billion.
Assets Held for Sale
As of June 30, 2014, we had one industrial building totaling 31,000 square feet that met the criteria as held for sale.
Dispositions
During the second quarter of 2014, we sold to third-parties 20 industrial buildings aggregating 2.8 million square feet for net proceeds of $125.3 million, which were previously classified as held for sale. The dispositions included:
| • | One building totaling 1.3 million square feet located in the Atlanta market. |
| • | Five buildings totaling 0.9 million square feet located in the Dallas market. |
| • | 13 buildings totaling 0.5 million square feet located in the Portland market. |
| • | One building totaling 0.1 million square feet located in the Tampa market. |
Second Quarter 2014 Supplemental Reporting Package |
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Page 12 |
Development Overview
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Development Overview
The following summarizes our development portfolio and projects under development as of June 30, 2014:
| Number | Rentable | Cumulative | ||||||||||||||||||||||||
| ($ and square | of | Square | Percent | Costs | Projected | Completion | Percent | Percent | ||||||||||||||||||
| feet in thousands) | Market | Buildings | Feet(1) | Owned | Incurred(2) | Investment | Date(3) | Occupied | Leased | |||||||||||||||||
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Development Portfolio(4) | ||||||||||||||||||||||||||
South Bay DC | So. California | 1 | 266 | 100% | $ | 34,708 | $ | 36,404 | Q3-2013 | - % | - % | |||||||||||||||
Ontario Mills DC | So. California | 1 | 520 | 100% | 39,477 | 42,221 | Q3-2013 | - % | 100% | |||||||||||||||||
Fairfield Blgs 2-4 | New Jersey | 3 | 321 | 100% | 36,103 | 37,742 | Q3-2013 | 60% | 79% | |||||||||||||||||
Pine Brook Blgs B&C | New Jersey | 2 | 225 | 100% | 25,848 | 27,008 | Q3-2013 | 19% | 19% | |||||||||||||||||
Imperial DC | Houston | 1 | 328 | 100% | 19,291 | 21,531 | Q1-2014 | - % | - % | |||||||||||||||||
Westport DC Bldg C | Salt Lake City | 1 | 416 | 100% | 21,414 | 25,199 | Q2-2014 | - % | - % | |||||||||||||||||
Chino DC | So. California | 1 | 410 | 100% | 32,298 | 35,678 | Q2-2014 | - % | - % | |||||||||||||||||
Beltway Crossing DC | Houston | 2 | 209 | 100% | 13,667 | 15,767 | Q2-2014 | 18% | 18% | |||||||||||||||||
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Total Development Portfolio | 12 | 2,695 | 100% | $ | 222,806 | $ | 241,550 | 10% | 32% | |||||||||||||||||
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Projects Under Development | ||||||||||||||||||||||||||
Under Construction | ||||||||||||||||||||||||||
I-95 DC | Baltimore / D.C. | 1 | 449 | 100% | $ | 26,254 | $ | 32,852 | Q3-2014 | 100% | ||||||||||||||||
Centerpointe 4 Expansion | So. California | 1 | 501 | 100% | 23,308 | 38,926 | Q3-2014 | 100% | ||||||||||||||||||
Franklin Square II | Baltimore / D.C. | 1 | 192 | 100% | 3,025 | 13,985 | Q4-2014 | - % | ||||||||||||||||||
Tamarac II | South Florida | 1 | 104 | 100% | 2,047 | 11,242 | Q1-2015 | - % | ||||||||||||||||||
Tamarac III | South Florida | 1 | 42 | 100% | 886 | 4,929 | Q1-2015 | - % | ||||||||||||||||||
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Total Under Construction | 5 | 1,288 | 100% | 55,520 | 101,934 | 74% | ||||||||||||||||||||
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Pre-Construction | ||||||||||||||||||||||||||
Miami III | South Florida | 1 | 102 | 100% | 2,890 | 9,132 | - % | |||||||||||||||||||
Miami IV | South Florida | 1 | 88 | 100% | 2,514 | 8,104 | - % | |||||||||||||||||||
Leigh Valley III | Pennsylvania | 1 | 106 | 100% | 1,357 | 8,709 | - % | |||||||||||||||||||
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Total Pre-Construction | 3 | 296 | 100% | 6,761 | 25,945 | - % | ||||||||||||||||||||
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Total Projects Under Development | 8 | 1,584 | 100% | $ | 62,281 | $ | 127,879 | 60% | ||||||||||||||||||
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Development Properties Transferred to Operating Portfolio |
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Northpoint CC | Dallas | 1 | 301 | 100% | $ | 14,548 | $ | 14,548 | Q4-2013 | 100% | 100% | |||||||||||||||
Pine Brook Bldg A | New Jersey | 1 | 91 | 100% | 10,143 | 10,143 | Q3-2013 | 94% | 94% | |||||||||||||||||
South San Francisco II DC | San Francisco Bay Area | 1 | 85 | 100% | 10,967 | 10,967 | Q2-2013 | 39% | 62% | |||||||||||||||||
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| 3 | 477 | 100% | $ | 35,658 | $ | 35,658 | 88% | 92% | ||||||||||||||||||
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| (1) | Rentable square feet for pre-construction projects is projected and cannot be assured. |
| (2) | As of June 30, 2014. |
| (3) | The completion date represents the acquisition date, date of building shell completion or estimated date of shell completion. |
| (4) | The development portfolio includes buildings acquired with the intention to reposition or redevelop, or buildings recently completed which have not yet stabilized. 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. |
Second Quarter 2014 Supplemental Reporting Package |
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Page 13 |
Debt
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Summary of Consolidated Debt
As of June 30, 2014, we had approximately $1.9 billion of consolidated indebtedness, which was comprised of borrowings under our lines of credit and term loans, and our mortgage note financings. Our consolidated debt had a weighted-average remaining term of approximately 5.4 years. The following is a summary of our consolidated debt as of June 30, 2014:
| Weighted-Average | ||||||||
| Stated Interest Rate | Balance as of | |||||||
($ in thousands) | as of June 30, 2014 | Maturity Date | June 30, 2014 | |||||
Lines of credit | 1.95% | August 2015 - January 2017 | $ | 275,000 | ||||
Term loans(1) | 2.12% | January 2018 - January 2019 | 500,000 | |||||
Fixed-rate mortage notes | 4.26% | June 2015 - November 2024 | 1,113,513 | |||||
Variable-rate mortgage note | 2.19% | May 2015 | 9,080 | |||||
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Total / weighted-average mortgage notes | 4.25% | 1,122,593 | ||||||
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Total / weighted-average consolidated debt | 3.35% | $ | 1,897,593 | |||||
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Fixed-rate debt(2) | 4.02% | 69% | ||||||
Variable-rate debt(2) | 1.85% | 31% | ||||||
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Total / weighted-average | 3.35% | 100% | ||||||
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Scheduled Principal Payments of Debt
As of June 30, 2014, the principal payments due on our consolidated debt during each of the next five years and thereafter were as follows:
($ in thousands) | Lines of Credit (3) | Term Loans | Mortgage Notes | Total | ||||||||||||
Remainder of 2014 | $ | - | $ | - | $ | 3,583 | $ | 3,583 | ||||||||
2015 | 190,000 | - | 52,985 | 242,985 | ||||||||||||
2016 | - | - | 20,040 | 20,040 | ||||||||||||
2017 | 85,000 | - | 62,174 | 147,174 | ||||||||||||
2018 | - | 200,000 | 151,918 | 351,918 | ||||||||||||
Thereafter | - | 300,000 | 826,557 | 1,126,557 | ||||||||||||
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Total principal payments | 275,000 | 500,000 | 1,117,257 | 1,892,257 | ||||||||||||
Unamortized premium on assumed debt | - | - | 5,336 | 5,336 | ||||||||||||
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Total | $ | 275,000 | $ | 500,000 | $ | 1,122,593 | $ | 1,897,593 | ||||||||
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| (1) | Effective January 14, 2014, the interest rate for the $200.0 million term loan was fixed through the use of interest rate swaps at an all-in interest rate of 2.68% as of June 30, 2014. The forward-starting interest rate swap agreements relating to the $300.0 million term loan has an effective date of January 20, 2015 and will have an all-in interest rate ranging from 3.31% to 4.16%, depending on our consolidated leverage ratio at that time. |
| (2) | Assuming the effects of the forward-starting interest rate swap agreements relating to the $300.0 million term loan, approximately 85% of our total debt was fixed and 15% of our total debt was variable as of June 30, 2014. |
| (3) | Both lines of credit may be extended pursuant to two one-year extension options, subject to certain conditions. |
Second Quarter 2014 Supplemental Reporting Package |
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Page 14 |
Definitions
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Annualized Base Rent.Annualized base rent is calculated as monthly base rent including the impact of any contractual tenant concessions (cash basis) per the terms of the lease as of June 30, 2014, multiplied by 12.
Adjusted EBITDA.Adjusted EBITDA represents net income (loss) attributable to common stockholders before interest, taxes, depreciation, amortization, stock-based compensation expense, gains on business combinations, and proportionate share of interest, depreciation and amortization from unconsolidated joint ventures. We use Adjusted EBITDA to measure our operating performance to provide investors relevant and useful information because it allows fixed income investors to view income from our operations on an unleveraged basis before the effects of non-cash items, such as depreciation and amortization.
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Reconciliation of net income (loss) to adjusted EBITDA: | ||||||||||||||||
Net income (loss) | $ | 20,421 | $ | (14,212) | $ | 15,606 | $ | (25,129) | ||||||||
Interest expense | 15,513 | 11,440 | 31,310 | 23,038 | ||||||||||||
Proportionate share of interest expense from unconsolidated joint venture | 8 | 857 | 8 | 1,894 | ||||||||||||
Real estate-related depreciation and amortization | 35,244 | 26,602 | 72,860 | 53,884 | ||||||||||||
Proportionate share of real estate-related depreciation and amortization from unconsolidated joint ventures | - | 1,298 | 9 | 3,158 | ||||||||||||
Acquisition costs | 1,543 | 10,573 | 2,096 | 13,302 | ||||||||||||
Gain on disposition of real estate properties | (24,471) | - | (24,471) | - | ||||||||||||
Proportionate share of acquisition costs from unconsolidated joint ventures | - | 21 | - | 79 | ||||||||||||
Share-based compensation expense | 313 | 122 | 345 | 122 | ||||||||||||
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Adjusted EBITDA | $ | 48,571 | $ | 36,701 | $ | 97,763 | $ | 70,348 | ||||||||
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Consolidated Portfolio.The consolidated portfolio excludes properties owned through our unconsolidated joint ventures.
Development Portfolio.The development portfolio includes buildings acquired with the intention to reposition or redevelop, or buildings recently completed which have not yet reached stabilization. We generally consider a building to be stabilized on the earlier to occur of the first anniversary of a building’s completion or a building achieving 90% occupancy.
Funds from Operations (“FFO”) and Company-Defined FFO.We believe that FFO and Company-defined FFO, in addition to net income (loss) and cash flows from operating activities as defined by GAAP, are useful supplemental performance measures that our management uses to evaluate our consolidated operating performance. However, these supplemental, non-GAAP measures should not be considered as an alternative to net income (loss) or to cash flows from operating activities as an indication of our performance and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders. No single measure can provide users of financial information with sufficient information and only our disclosures read as a whole can be relied upon to adequately portray our financial position, liquidity, and results of operations. In addition, other REITs may define FFO and similar measures differently and choose to treat acquisition-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 or losses on the acquisition of certain joint venture properties. We use FFO as an indication of our consolidated operating performance and as a guide to making decisions about future investments.
Second Quarter 2014 Supplemental Reporting Package |
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Page 15 |
Definitions
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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 income (loss) under GAAP. Loss from the early extinguishment of debt is excluded because it was a loss recognized as part of a one-time transaction. The purchase of operating properties has been a key strategic objective of our business plan focused on generating growth in 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.
Management does not include historical acquisition-related expenses in its evaluation of future operating performance, as such costs are one-time costs related to the acquisition. 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 to, among other things: (i) evaluate and compare the potential performance of the portfolio after the acquisition phase is complete, and (ii) evaluate potential performance to determine liquidity event strategies. We believe Company-defined FFO facilitates a comparison to other REITs that are not engaged in significant acquisition activity and have similar operating characteristics as us. We believe investors are best served if the information that is made available to them allows them to align their analyses and evaluation with the same performance metrics used by management in planning and executing our business strategy. We believe that these performance metrics will assist investors in evaluating the potential performance of the portfolio 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 income (loss) or to cash flows from operating activities and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, NAREIT, nor any regulatory body has passed judgment on the acceptability of the adjustments used to calculate Company-defined FFO. In the future, the SEC, NAREIT, or a regulatory body may decide to standardize the allowable adjustments across the non-traded REIT industry at which point we may adjust our calculation and characterization of Company-defined FFO.
GAAP.Generally accepted accounting principles used in the United States.
Net Operating Income (“NOI”) and Cash NOI.We define (i) NOI as GAAP rental revenues less GAAP rental expenses and (ii) cash NOI as NOI (as previously defined), excluding non-cash amounts recorded for straight-line rents and the amortization of above and below market leases. We consider NOI and cash NOI to be appropriate supplemental performance measures. We believe NOI and cash NOI provide useful information to our investors regarding our financial condition and results of operations because NOI and cash NOI reflect the operating performance of our properties and exclude certain items that are not considered to be controllable in connection with the management of the properties, such as real estate-related depreciation and amortization, acquisition-related expenses, general and administrative expenses, and interest expense. However, NOI and cash NOI should not be viewed as alternative measures of our financial performance since NOI and cash NOI excludes such expenses, which could materially impact our results of operations. Further, our NOI and cash NOI may not be comparable to that of other real estate companies as they may use different methodologies for calculating NOI and cash NOI. Therefore, we believe net income (loss), as defined by GAAP, to be the most appropriate GAAP measure to evaluate our overall performance. Refer to the reconciliation below of our GAAP net income (loss) to NOI and cash NOI.
Second Quarter 2014 Supplemental Reporting Package |
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Page 16 |
Definitions
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| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
($ in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
GAAP net income (loss) | $ | 20,421 | $ | (14,212) | $ | 15,606 | $ | (25,129) | ||||||||
Real estate-related depreciation and amortization | 35,244 | 26,602 | 72,860 | 53,884 | ||||||||||||
General and administrative expenses | 1,886 | 1,792 | 3,684 | 3,453 | ||||||||||||
Asset management fees | 7,314 | 5,222 | 14,636 | 9,754 | ||||||||||||
Acquisition costs | 1,543 | 10,573 | 2,096 | 13,302 | ||||||||||||
Other (income) expenses | (8,949) | 11,610 | 6,869 | 24,494 | ||||||||||||
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NOI | $ | 57,459 | $ | 41,587 | $ | 115,751 | $ | 79,758 | ||||||||
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Straight-line rents | (4,025) | (3,648) | (9,050) | (5,930) | ||||||||||||
Amortization of above market leases, net | 654 | 820 | 2,075 | 1,875 | ||||||||||||
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Cash NOI | $ | 54,088 | $ | 38,759 | $ | 108,776 | $ | 75,703 | ||||||||
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Occupied Rate / Leased Rate.The occupied rate reflects the square footage with a paying customer in place. The leased rate includes the occupied square footage and additional square footage with leases in place that have not yet commenced.
Operating Portfolio.The operating portfolio includes stabilized properties.
Same Store Operating Properties.The same store portfolio includes operating properties owned for the entirety of both the current year period and prior year period for which the operations have been stabilized. Properties that do not meet the same store criteria are included in “other properties” in “Selected Financial Data” above. The same store operating portfolio for the three months ended June 30, 2014 and 2013 included 178 buildings owned as of April 1, 2013. The same store operating portfolio for the six months ended June 30, 2014 and 2013 included 171 buildings owned as of January 1, 2013.
Second Quarter 2014 Supplemental Reporting Package |
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Page 17 |