2008-08-04 15:30:00
DCT Industrial Trust Reports 2008 Second Quarter Results
DENVER, Aug. 4 /EMWNews/ -- DCT Industrial Trust Inc. (NYSE: DCT), a leading industrial real estate investment trust, today announced financial results for the quarter and six months ended June 30, 2008. Funds from operations (FFO) attributable to common stockholders totaled $32.3 million for the second quarter of 2008 and $62.6 million for the six months ended June 30, 2008. FFO was $0.16 per diluted share for the second quarter of 2008 and $0.30 per diluted share for the six months ended June 30, 2008, compared to $0.19 per diluted share and $0.36 per diluted share reported for the same periods in 2007. Net income attributable to common stockholders for the second quarter of 2008 was $15.5 million, or $0.09 per diluted share, compared to $7.8 million, or $0.05 per diluted share, reported for the second quarter of 2007. Net income for the six months ended June 30, 2008 was $15.9 million, or $0.09 per diluted share, compared to net income of $23.2 million, or $0.14 per diluted share, for the six months ended June 30, 2007. Second quarter 2008 net income includes $16.7 million of gains and a $1.2 million impairment charge related to the contribution or sale of real estate. While second quarter FFO did not include any real estate gains, it was reduced by the impairment charge. Second quarter 2007 net income included $9.1 million of gains on the contribution or sale of real estate, of which $9.0 million was included in FFO. "While our leasing activity and rental rate growth remain steady and in-line with expectations, our caution for the remainder of 2008 has increased," said Phil Hawkins, Chief Executive Officer of DCT Industrial Trust. "We've taken additional steps to further strengthen our balance sheet this year, including extending the maturity on $175 million of an unsecured note by five years and closing a $300 million senior unsecured term loan, both with very favorable terms, and disposing of $89 million of low-growth, non-strategic assets. We remain confident that our financial flexibility will benefit us through this softer economic environment, and we will continue to focus on executing our business plan to build long-term value." Operating Portfolio As of June 30, 2008, the Company owned 378 consolidated operating properties, or 53.0 million square feet, compared to 363 consolidated operating properties, or 52.5 million square feet, as of June 30, 2007. Net operating income was $46.5 million in the second quarter of 2008, compared to $45.7 million reported for the second quarter of 2007. DCT's consolidated operating portfolio occupancy declined to 91.8% as of June 30, 2008, compared to 92.8% as of June 30, 2007, primarily due to the bankruptcy of Wickes Furniture. Including an additional 13.0 million square feet of operating properties held in joint ventures, occupancy as of June 30, 2008 was 93.3%, compared to 93.6% a year ago. Same store net operating income increased 1.3% on a cash basis and 0.3% on a GAAP basis in the second quarter of 2008, when compared to the same period last year. Occupancy of same store properties was 92.3% as of June 30, 2008, compared to 93.1% as of June 30, 2007. Leasing activity increased with 2.5 million square feet of leases signed during the second quarter, up from 1.9 million square feet of leases signed in the first quarter of 2008. Tenant retention was 74.4% for the second quarter of 2008 and 73.3% year to date. Realized rent growth on signed leases for which there was a prior tenant averaged 12.7% on a GAAP basis and 5.4% on a cash basis in the second quarter of 2008. Bad debt expense totaled $0.2 million in the second quarter of 2008, compared to $0.6 million last quarter and $0.6 million in the second quarter of 2007. Disposition and Development Activity Consistent with its 2008 business plan, DCT Industrial Trust did not acquire any buildings and disposed of four assets totaling 1.2 million square feet for a combined sales price of approximately $71.1 million during the second quarter of 2008. Following the end of the second quarter, DCT disposed of four industrial buildings totaling 199,000 square feet for a combined sales price of approximately $11.8 million, bringing year to date sales to more than $89 million. As of June 30, 2008, DCT Industrial Trust had 8.9 million square feet under development. "While we completed the lease-up of two development projects in Chicago and Southern California and two projects in Mexico, we have experienced a slowdown in the leasing of some of our other development assets," said Jim Cochran, President and Chief Investment Officer of DCT Industrial Trust. "Given our caution for the rest of the year, we have decided to move the stabilization dates for several projects from 2008 to 2009." Financing Activity During the second quarter, DCT Industrial Trust closed a two-year $300 million senior unsecured term loan that can be extended for one year at the Company's option. The first $100 million was drawn on June 9, 2008 and used to repay maturing unsecured notes. The remaining $200 million can be funded anytime up to December 31, 2008, at DCT's discretion. DCT Industrial Trust has entered into a swap to fix LIBOR on the initial funding for two years. The loan currently bears interest at LIBOR plus 150 basis points, based on the Company's current leverage, bringing the effective rate to 4.73% per annum. Balance Sheet DCT Industrial's balance sheet remains strong, with consolidated debt to book value of total assets (before depreciation and amortization) of 37.1% as of June 30, 2008, compared to 37.4% as of December 31, 2007. The Company's fixed charge coverage for the second quarter of 2008 was 3.2 times. Excluding $1.4 million of income related to forward-starting interest rate swaps, the fixed charge coverage was 3.0 times. Dividend DCT Industrial Trust's Board of Directors has declared a $0.16 per share quarterly cash dividend, payable on October 17, 2008, to stockholders of record as of October 6, 2008. Guidance DCT Industrial has lowered its 2008 guidance to FFO per diluted share of $0.60 to $0.66 and net income of $0.09 to $0.15 per diluted share, primarily due to a decrease in expectations for development gains. Conference Call Information DCT Industrial Trust will host a conference call to discuss second quarter results and its recent business activities on Tuesday, August 5, 2008 at 12:00 PM Eastern. Stockholders and interested parties may listen to a live broadcast of the conference call by dialing (800) 860-2442 or (412) 858-4600. A telephone replay will be available for five days following the call by dialing (877) 344-7529 or (412) 317-0088 and entering the passcode 420896. A live webcast and replay of the conference call will be available on the investor relations page of DCT's website at http://www.dctindustrial.com. Supplemental information will be available in the Investor Relations section of the Company's website at http://www.dctindustrial.com or by e-mail request at [email protected]. Interested parties may also obtain supplemental information from the SEC's website at http://www.sec.gov.
About DCT Industrial Trust
DCT Industrial Trust is a leading industrial real estate company that
owns, operates and develops high-quality bulk distribution and light
industrial properties in high-volume distribution markets in the U.S. and
Mexico. As of June 30, 2008, the Company owned, managed or had under
development 75.7 million square feet of assets leased to approximately 850
customers, including 16.9 million square feet managed on behalf of three
institutional joint venture partners. Additional information is available
at http://www.dctindustrial.com.
DCT INDUSTRIAL TRUST INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share information)
June 30, December 31,
2008 2007
(unaudited)
ASSETS
Land $509,319 $519,584
Buildings and improvements 2,119,216 2,139,961
Intangible lease assets 182,012 188,079
Construction in progress 54,143 35,282
Total Investment in Properties 2,864,690 2,882,906
Less accumulated depreciation and
amortization (359,512) (310,691)
Net Investment in Properties 2,505,178 2,572,215
Investments in and advances to unconsolidated
joint ventures 122,173 102,750
Net Investment in Real Estate 2,627,351 2,674,965
Cash and cash equivalents 23,697 30,481
Notes receivable 20,467 27,398
Deferred loan costs, net 5,793 4,828
Deferred loan costs - financing
obligations, net - 1,345
Straight-line rent and other receivables 27,860 26,879
Other assets, net 9,453 13,096
Assets held for sale 8,912 -
Total Assets $2,723,533 $2,778,992
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $38,667 $31,267
Distributions payable 33,245 32,994
Tenant prepaids and security deposits 15,753 13,896
Other liabilities 6,663 8,117
Intangible lease liability, net 8,066 9,022
Line of credit 103,000 82,000
Senior unsecured notes 425,000 425,000
Mortgage notes 615,526 649,568
Financing obligations - 14,674
Liabilities related to assets held for sale 343 -
Total Liabilities 1,246,263 1,266,538
Minority interests 318,088 349,782
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000
shares authorized, none outstanding - -
Shares-in-trust, $0.01 par value, 100,000,000
shares authorized, none outstanding - -
Common stock, $0.01 par value, 350,000,000
shares authorized, 172,136,070 and 168,379,863
shares issued and outstanding as of June 30,
2008 and December 31, 2007, respectively 1,721 1,684
Additional paid-in capital 1,629,288 1,593,165
Distributions in excess of earnings (464,864) (426,210)
Accumulated other comprehensive loss (6,963) (5,967)
Total Stockholders' Equity 1,159,182 1,162,672
Total Liabilities and Stockholders'
Equity $2,723,533 $2,778,992
Book value of total assets before depreciation:
Total Assets $2,723,533 $2,778,992
Add back accumulated depreciation and
amortization 359,512 310,691
Book value of total assets before
depreciation and amortization $3,083,045 $3,089,683
Percentage of debt to total assets 42.0% 41.6%
Percentage of debt to book value of total assets
before depreciation and amortization 37.1% 37.4%
DCT INDUSTRIAL TRUST INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited, in thousands, except per share information)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
REVENUES:
Rental revenues $62,393 $60,868 $125,897 $123,997
Institutional
capital management
and other fees 614 572 1,474 1,318
Total Revenues 63,007 61,440 127,371 125,315
OPERATING EXPENSES:
Rental expenses 7,327 7,243 15,845 14,836
Real estate taxes 8,551 7,974 16,935 16,210
Real estate related
depreciation and
amortization 28,893 27,510 57,148 55,404
General and
administrative 5,083 5,677 10,965 9,733
Total Operating
Expenses 49,854 48,404 100,893 96,183
Operating Income 13,153 13,036 26,478 29,132
OTHER INCOME AND EXPENSE:
Equity in income (loss)
of unconsolidated joint
ventures, net 439 (31) 726 43
Interest expense (11,136) (15,020) (25,566) (31,703)
Interest income and
other 567 2,157 1,001 3,139
Income taxes (360) (502) (897) (962)
Income (Loss) Before
Minority Interests 2,663 (360) 1,742 (351)
Minority interests (431) 102 (220) 187
Income (Loss) From
Continuing
Operations 2,232 (258) 1,522 (164)
Income from discontinued
operations 13,296 358 14,028 8,870
Income Before Gain
(Loss) On
Dispositions Of
Real Estate
Interests 15,528 100 15,550 8,706
Gain (loss) on
dispositions of real
estate interests, net
of minority interest (32) 7,737 330 14,486
NET INCOME $15,496 $7,837 $15,880 $23,192
INCOME PER COMMON
SHARE - BASIC:
Income (Loss) From
Continuing
Operations $0.01 $(0.00) $0.01 $(0.00)
Income from
discontinued
operations 0.08 0.00 0.08 0.05
Gain (loss) on
dispositions of real
estate interests, net
of minority interest (0.00) 0.05 0.00 0.09
Net Income $0.09 $0.05 $0.09 $0.14
INCOME PER COMMON
SHARE - DILUTED:
Income (Loss) From
Continuing Operations $0.01 $(0.00) $0.01 $(0.00)
Income from discontinued
operations 0.08 0.00 0.08 0.05
Gain (loss) on
dispositions of real
estate interests, net
of minority interest (0.00) 0.05 0.00 0.09
Net Income $0.09 $0.05 $0.09 $0.14
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 171,429 168,355 169,908 168,355
Diluted 207,654 198,703 207,448 197,711
DCT Industrial Trust Inc. and Subsidiaries
Summary Consolidated Statements of Funds From Operations
(in thousands, except per share information)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Net income attributable
to common shares $15,496 $7,837 $15,880 $23,192
Adjustments:
Real estate related
depreciation and
amortization 29,266 28,389 58,409 57,172
Equity in (income) of
unconsolidated joint
ventures, net (439) 31 (726) (43)
Equity in FFO of
unconsolidated
joint ventures 1,517 415 2,984 811
(Gain) on dispositions
of real estate
interests (16,723) (9,132) (17,530) (26,578)
Gain (loss) on
dispositions of
non-depreciated
real estate (39) 9,014 207 12,725
Minority interest in
the operating
partnership's share
of the above
adjustments (2,367) (4,397) (7,951) (6,602)
Funds from operations
attributable to common
shares - basic 26,711 32,157 51,273 60,677
FFO attributable to
dilutive OP Units 5,634 5,774 11,305 10,571
Funds from operations
attributable to common
shares - diluted $32,345 $37,931 $62,578 $71,248
Basic FFO per common
share $0.16 $0.19 $0.30 $0.36
Diluted FFO per common
share $0.16 $0.19 $0.30 $0.36
Weighted average common
shares outstanding:
Basic 171,429 168,355 169,908 168,355
Dilutive OP Units 36,225 30,348 37,540 29,356
Diluted 207,654 198,703 207,448 197,711
Guidance:
Full-Year Range for
2008
Guidance: (low) (high)
Earnings per diluted share $0.09 $0.15
Gains on sale of depreciated assets (0.07) (0.07)
Real estate related depreciation and amortization 0.58 0.58
FFO attributable to common shares per diluted share $0.60 $0.66
Guidance excludes future gains or losses from sale of depreciated assets.
The following table shows the calculation of our Fixed Charge Coverage
for the three and six months ended June 30, 2008 and 2007 (in thousands).
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Net income $15,496 $7,837 $15,880 $23,192
Interest expense (1) 11,245 15,204 25,819 32,084
Pro rata share of interest
expense from unconsolidated JVs 1,510 957 2,841 1,783
Real estate related
depreciation and amortization (1) 29,266 28,389 58,409 57,172
Pro rata share of real estate
related depreciation and
amortization from
unconsolidated JVs 1,163 446 2,378 771
Income taxes 365 533 914 1,004
Stock-based compensation
amortization expense 852 598 1,595 1,092
Minority interests (1) 3,227 1,371 3,269 3,857
Non-FFO (gains) losses on
dispositions of real estate
interests, net (16,762) (118) (17,323) (13,853)
Adjusted EBITDA $46,362 $55,217 $93,782 $107,102
Calculation of Fixed Charges:
Interest expense excluding
financing obligations (1) $11,245 $13,868 $25,767 $28,881
Interest expense related to
financing obligations - 1,336 52 3,203
Capitalized interest 1,865 1,669 3,919 3,222
Amortization of loan costs
and debt premium/discount 98 14 218 71
Amortization of financing
obligations - (161) (4) (356)
Pro rata share of interest
expense from
unconsolidated JVs 1,510 957 2,841 1,783
Total Fixed Charges $14,718 $17,683 $32,793 $36,804
Fixed Charge Coverage 3.2 3.1 2.9 2.9
Fixed Charge Coverage,
Excluding Financing
Obligations 3.2 3.3 2.9 3.2
Fixed Charge Coverage,
Excluding Hedge Settlement
Income (2) 3.0 - - -
(1) Includes amounts related to discontinued operations.
(2) Excludes $1.4 million income related to settlement of
forward-starting interest rate swaps.
The following table is a reconciliation of our property NOI to our
reported "Income (Loss) From Continuing Operations" for the three and six
months ended June 30, 2008 and 2007 (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Same Store property
NOI $42,575 $42,462 $83,716 $84,114
Non-same store NOI and
revenues related to
early lease
terminations and
buyout, net 3,940 3,189 9,401 8,837
Total NOI 46,515 45,651 93,117 92,951
Institutional capital
management and
other fees 614 572 1,474 1,318
Real estate related
depreciation and
amortization (28,893) (27,510) (57,148) (55,404)
General and
administrative
expenses (5,083) (5,677) (10,965) (9,733)
Equity in income
(losses) of
unconsolidated
joint ventures, net 439 (31) 726 43
Interest expense (11,136) (15,020) (25,566) (31,703)
Interest income and
other 567 2,157 1,001 3,139
Income taxes (360) (502) (897) (962)
Minority interests (431) 102 (220) 187
Income (Loss) from
Continuing
Operations $2,232 $(258) $1,522 $(164)
The following table is a reconciliation of our same store NOI to our cash
basis same store NOI for the three and six months ended June 30, 2008 and 2007
(in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Same Store property NOI $42,575 $42,462 $83,716 $84,114
Less straight-line rents (640) (910) (1,344) (2,091)
Less amortization of
above/below market rents 338 192 446 833
Cash basis same store
NOI $42,273 $41,744 $82,818 $82,856
Financial Measures
Net operating income ("NOI") is defined as rental revenue, including
reimbursements, less rental expenses and real estate taxes, and excludes
depreciation, amortization, general and administrative expenses and
interest expense. DCT Industrial considers NOI, same store NOI and cash
basis same store NOI to be appropriate supplemental performance measures
because they reflect the operating performance of DCT Industrial's
properties and exclude certain items that are not considered to be
controllable in connection with the management of the property such as
depreciation, interest expense, interest income and general and
administrative expenses. However, these measures should not be viewed as
alternative measures of DCT Industrial's financial performance since they
exclude expenses which could materially impact our results of operations.
Further, DCT Industrial's NOI, same store NOI and cash basis same store NOI
may not be comparable to that of other real estate companies, as they may
use different methodologies for calculating these measures. Therefore, DCT
Industrial believes net income, as defined by GAAP, to be the most
appropriate measure to evaluate DCT Industrial's overall financial
performance.
DCT Industrial believes that net income, as defined by GAAP, is the
most appropriate earnings measure. However, DCT Industrial considers funds
from operations ("FFO"), as defined by the National Association of Real
Estate Investment Trusts ("NAREIT"), to be a useful supplemental, non-GAAP
measure of DCT Industrial's operating performance. NAREIT developed FFO as
a relative measure of performance of an equity REIT in order to recognize
that the value of income-producing real estate historically has not
depreciated on the basis determined under GAAP. FFO is generally defined as
net income, calculated in accordance with GAAP, plus real estate-related
depreciation and amortization, less gains (or losses) from dispositions of
operating real estate held for investment purposes and adjustments to
derive DCT Industrial's pro rata share of FFO of consolidated and
unconsolidated joint ventures. We include the gains or losses from
dispositions of properties which were acquired or developed with the
intention to sell or contribute to an investment fund in our definition of
FFO. Readers should note that FFO captures neither the changes in the value
of DCT Industrial's properties that result from use or market conditions,
nor the level of capital expenditures and leasing commissions necessary to
maintain the operating performance of DCT Industrial's properties, all of
which have real economic effect and could materially impact DCT
Industrial's results from operations. NAREIT's definition of FFO is subject
to interpretation and modifications to the NAREIT definition of FFO is
common. Accordingly, DCT Industrial's FFO may not be comparable to such
other REITs' FFO and FFO should be considered only as a supplement to net
income as a measure of DCT Industrial's performance.
DCT Industrial calculates our fixed charge coverage calculation based
on adjusted EBITDA, which is defined as earnings from operations before
interest, taxes, depreciation, amortization, stock-based compensation
expense and minority interest, and excludes non-FFO gains on disposed
assets. We use adjusted EBITDA to measure our operating performance and to
provide investors relevant and useful information because it allows fixed
income investors to view income from our operations on an unleveraged basis
before the effects of non-cash items, such as depreciation and
amortization. We also present our fixed charge coverage for the three
months ended June 30, 2008 excluding the settlement income related to
forward-starting interest rate swaps because it allows fixed income
investors to view income from our operations on an unleveraged basis before
the effects of this item.
Forward-Looking Information
The Company makes statements in this document that are considered
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E
of the Securities Exchange Act of 1934, as amended, or the Exchange Act,
which are usually identified by the use of words such as "anticipates,"
"believes," "estimates," "expects," "intends," "may," "plans," "projects,"
"seeks," "should," "will," and variations of such words or similar
expressions. The Company intends these forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 and are
including this statement for purposes of complying with those safe harbor
provisions. These forward-looking statements reflect the Company's current
views about its plans, intentions, expectations, strategies and prospects,
which are based on the information currently available to the Company and
on assumptions it has made. Although the Company believes that its plans,
intentions, expectations, strategies and prospects as reflected in or
suggested by those forward-looking statements are reasonable, the Company
can give no assurance that the plans, intentions, expectations or
strategies will be attained or achieved. Furthermore, actual results may
differ materially from those described in the forward-looking statements
and will be affected by a variety of risks and factors that are beyond its
control including, without limitation: the competitive environment in which
the Company operates; real estate risks, including fluctuations in real
estate values and the general economic climate in local markets and
competition for tenants in such markets; decreased rental rates or
increasing vacancy rates; defaults on or non-renewal of leases by tenants;
acquisition and development risks, including failure of such acquisitions
and development projects to perform in accordance with projections; the
timing of acquisitions and dispositions; natural disasters such as
hurricanes, fires and earthquakes; national, international, regional and
local economic conditions, including, in particular the recent softening of
the U.S. economy; the general level of interest rates and the availability
of debt financing, particularly in light of the recent disruption in the
credit markets; energy costs; the terms of governmental regulations that
affect the Company and interpretations of those regulations, including
changes in real estate and zoning laws and increases in real property tax
rates; financing risks, including the risk that the Company's cash flows
from operations may be insufficient to meet required payments of principal
and interest; lack of or insufficient amounts of insurance; litigation,
including costs associated with prosecuting or defending claims and any
adverse outcomes; the consequences of future terrorist attacks; possible
environmental liabilities, including costs, fines or penalties that may be
incurred due to necessary remediation of contamination of properties
presently owned or previously owned by the Company; and other risks and
uncertainties detailed from time to time in DCT Industrial Trust's filings
with the Securities Exchange Commission. In addition, the Company's current
and continuing qualification as a REIT involves the application of highly
technical and complex provisions of the Internal Revenue Code of 1986, or
the Code, and depends on its ability to meet the various requirements
imposed by the Code through actual operating results, distribution levels
and diversity of stock ownership. The Company assumes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
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