What changed in Terreno Realty Corp's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Terreno Realty Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+369 added−292 removedSource: 10-K (2024-02-07) vs 10-K (2023-02-08)
Top changes in Terreno Realty Corp's 2023 10-K
369 paragraphs added · 292 removed · 174 edited across 6 sections
- Item 1. Business+173 / −69 · 6 edited
- Item 7. Management's Discussion & Analysis+112 / −133 · 94 edited
- Item 1A. Risk Factors+62 / −62 · 54 edited
- Item 2. Properties+15 / −14 · 13 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+3 / −8 · 3 edited
Item 1. Business
Business — how the company describes what it does
6 edited+167 added−63 removed0 unchanged
Item 1. Business
Business — how the company describes what it does
6 edited+167 added−63 removed0 unchanged
2022 filing
2023 filing
Biggest changeIf we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax at regular corporate rates.
Biggest changeIf it fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the IRS grants it relief under certain statutory provisions.
Item 1. Business. Overview Terreno Realty Corporation (“Terreno”, and together with its subsidiaries, “we”, “us”, “our”, “our Company” or “the Company”) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.
Organization Terreno Realty Corporation (“Terreno”, and together with its subsidiaries, the “Company”) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.
We are an internally managed Maryland corporation and elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Code, commencing with our taxable year ended December 31, 2010.
The Company is an internally managed Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2010. Note 2. Significant Accounting Policies Basis of Presentation.
We currently own our properties indirectly through subsidiaries and may utilize one or more taxable REIT subsidiaries as appropriate. 6 Table of Contents Our Tax Status We elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with our taxable year ended December 31, 2010.
The Company elected to be taxed as a REIT under the Code and operates as such beginning with its taxable year ended December 31, 2010.
To maintain REIT status we must meet a number of organizational and operational requirements, including a requirement that we annually distribute at least 90% of our net taxable income to our stockholders, excluding net capital gains. As a REIT, we generally will not be subject to federal income tax on REIT taxable income we currently distribute to our stockholders.
To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP).
As of December 31, 2022, we owned a total of 252 buildings aggregating approximately 15.3 million square feet, 46 improved land parcels consisting of approximately 161.4 acres and three properties under redevelopment that, upon completion, will consist of one building of approximately 34,000 square feet and two improved land parcels aggregating approximately 12.1 acres.
As of December 31, 2023, the Company owned 259 buildings aggregating approximately 16.0 million square feet, 45 improved land parcels consisting of approximately 152.4 acres, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development.
Removed
We invest in several types of industrial real estate, including warehouse/distribution (approximately 76.5% of our total annualized base rent as of December 31, 2022), flex (including light industrial and research and development, or R&D) (approximately 4.1%), transshipment (approximately 6.8%) and improved land (approximately 12.6%).
Added
Financial Statements of Terreno Realty Corporation Terreno Realty Corporation Consolidated Balance Sheets (in thousands – except share and per share data) December 31, 2023 December 31, 2022 ASSETS Investments in real estate Land $ 1,995,494 $ 1,850,860 Buildings and improvements 1,561,532 1,372,473 Construction in progress 343,485 51,896 Intangible assets 147,329 123,545 Total investments in properties 4,047,840 3,398,774 Accumulated depreciation and amortization (384,480) (323,631) Net investments in properties 3,663,360 3,075,143 Cash and cash equivalents 165,400 26,393 Restricted cash 836 1,690 Other assets, net 75,081 61,215 Total assets $ 3,904,677 $ 3,164,441 LIABILITIES AND EQUITY Liabilities Credit facility $ — $ — Term loans payable, net 199,145 198,993 Senior unsecured notes, net 572,418 571,825 Security deposits 32,934 27,454 Intangible liabilities, net 84,718 55,873 Dividends payable 39,052 30,753 Accounts payable and other liabilities 61,783 49,692 Total liabilities 990,050 934,590 Commitments and contingencies (Note 11) Equity Stockholders’ equity Common stock: $0.01 par value, 400,000,000 shares authorized, and 87,487,098 and 76,463,482 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively. 876 765 Additional paid-in capital 2,849,961 2,167,276 Common stock held in deferred compensation plan, 508,663 and 417,665 shares at December 31, 2023 and December 31, 2022, respectively.
Removed
We target functional properties in infill locations that may be shared by multiple tenants and that cater to customer demand within the various submarkets in which we operate. Infill locations are geographic locations surrounded by high concentrations of already developed land and existing buildings.
Added
(31,788) (26,462) Retained earnings 95,578 88,272 Total stockholders’ equity 2,914,627 2,229,851 Total liabilities and equity $ 3,904,677 $ 3,164,441 The accompanying notes are an integral part of these consolidated financial statements. 58 Table of Contents Terreno Realty Corporation Consolidated Statements of Operations (in thousands – except share and per share data) For the Year Ended December 31, 2023 2022 2021 REVENUES Rental revenues and tenant expense reimbursements $ 323,590 $ 276,212 $ 221,930 Total revenues 323,590 276,212 221,930 COSTS AND EXPENSES Property operating expenses 79,085 68,903 56,248 Depreciation and amortization 73,219 65,763 50,687 General and administrative 37,935 31,192 26,964 Acquisition costs and other 218 1,465 172 Total costs and expenses 190,457 167,323 134,071 OTHER INCOME (EXPENSE) Interest and other income 4,964 809 822 Interest expense, including amortization (24,796) (23,850) (18,054) Gain on sales of real estate investments 38,156 112,166 16,627 Total other income (expense) 18,324 89,125 (605) Net income 151,457 198,014 87,254 Allocation to participating securities (712) (854) (311) Net income available to common stockholders $ 150,745 $ 197,160 $ 86,943 EARNINGS PER COMMON SHARE - BASIC AND DILUTED: Net income available to common stockholders - basic $ 1.81 $ 2.61 $ 1.23 Net income available to common stockholders - diluted $ 1.81 $ 2.61 $ 1.23 BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 83,169,028 75,498,107 70,534,202 DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 83,371,099 75,586,480 70,793,670 The accompanying notes are an integral part of these consolidated financial statements. 59 Table of Contents Terreno Realty Corporation Consolidated Statements of Comprehensive Income (in thousands) For the Year Ended December 31, 2023 2022 2021 Net income $ 151,457 $ 198,014 $ 87,254 Other comprehensive income: Cash flow hedge adjustment — — 183 Comprehensive income $ 151,457 $ 198,014 $ 87,437 The accompanying notes are an integral part of these consolidated financial statements. 60 Table of Contents Terreno Realty Corporation Consolidated Statements of Equity (in thousands – except share data) Common Stock Additional Paid- in Capital Common Shares Held in Deferred Compensation Plan Deferred Compensation Plan Retained Earnings Accumulated Other Comprehensive Loss Number of Shares Amount Total Balance as of December 31, 2020 68,376,364 $ 686 $ 1,589,301 139,224 $ (7,546) $ 5,926 $ (183) $ 1,588,184 Net income — — — — — 87,254 — 87,254 Issuance of common stock, net of issuance costs of $6,123 6,736,455 66 463,680 — — — — 463,746 Forfeiture of common stock related to employee awards (776) — — — — — — — Common shares acquired related to employee awards (6,534) — (582) — — — — (582) Issuance of restricted stock 99,569 — — — — — — — Stock-based compensation — — 9,554 — — — — 9,554 Common stock dividends ($1.26 per share) — — — — — (90,376) — (90,376) Deposits to deferred compensation plan (136,503) — 7,651 136,503 (7,651) — — — Other comprehensive income — — — — — — 183 183 Balance as of December 31, 2021 75,068,575 752 2,069,604 275,727 (15,197) 2,804 — 2,057,963 Net income — — — — — 198,014 — 198,014 Issuance of common stock, net of issuance costs of $1,557 1,444,156 13 77,281 — — — — 77,294 Forfeiture of common stock related to employee awards (29,391) — — — — — — — Common shares acquired related to employee awards (14,823) — (1,045) — — — — (1,045) Issuance of restricted stock 136,903 — — — — — — — Stock-based compensation — — 10,171 — — — — 10,171 Common stock dividends ($1.48 per share) — — — — — (112,546) — (112,546) Deposits to deferred compensation plan, net of withdrawals (141,938) — 11,265 141,938 (11,265) — — — Balance as of December 31, 2022 76,463,482 765 2,167,276 417,665 (26,462) 88,272 — 2,229,851 Net income — — — — — 151,457 — 151,457 Issuance of common stock, net of issuance costs of $5,830 11,012,883 111 665,406 — — — — 665,517 Forfeiture of common stock related to employee awards (6,989) — — — — — — — Common shares acquired related to employee awards (23,854) — (1,513) — — — — (1,513) Issuance of restricted stock 132,574 — — — — — — — Stock-based compensation — — 13,466 — — — — 13,466 Common stock dividends ($1.70 per share) — — — — — (144,151) — (144,151) Deposits to deferred compensation plan, net of withdrawals (90,998) — 5,326 90,998 (5,326) — — — Balance as of December 31, 2023 87,487,098 $ 876 $ 2,849,961 508,663 $ (31,788) $ 95,578 $ — $ 2,914,627 The accompanying notes are an integral part of these consolidated financial statements. 61 Table of Contents Terreno Realty Corporation Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 151,457 $ 198,014 $ 87,254 Adjustments to reconcile net income to net cash provided by operating activities Straight-line rents (8,469) (9,353) (8,683) Amortization of lease intangibles (13,922) (16,271) (7,686) Depreciation and amortization 73,219 65,763 50,687 Gain on sales of real estate investments (38,156) (112,166) (16,627) Deferred financing cost amortization 1,545 1,371 1,335 Stock-based compensation 13,466 10,171 9,554 Changes in assets and liabilities Other assets (6,599) (1,368) (3,669) Accounts payable and other liabilities 7,136 7,049 20,043 Net cash provided by operating activities 179,677 143,210 132,208 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for property acquisitions (466,840) (407,558) (644,956) Proceeds from sales of real estate investments, net 73,077 162,145 41,082 Additions to construction in progress (123,570) (25,638) (11,274) Additions to buildings, improvements and leasing costs (53,055) (66,611) (51,290) Net cash used in investing activities (570,388) (337,662) (666,438) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 671,347 78,851 462,386 Issuance costs on issuance of common stock (5,038) (1,163) (5,683) Repurchase of common stock related to employee awards (1,513) (1,045) (582) Borrowings on credit facility 82,000 208,000 75,000 Payments on credit facility (82,000) (208,000) (75,000) Borrowings on term loans payable — 100,000 — Borrowings on senior unsecured notes — — 275,000 Payments on senior unsecured notes — (50,000) — Payments on mortgage loan payable — — (11,271) Payment of deferred financing costs (80) (1,498) (4,027) Dividends paid to common stockholders (135,852) (107,411) (84,628) Net cash provided by financing activities 528,864 17,734 631,195 Net increase (decrease) in cash and cash equivalents and restricted cash 138,153 (176,718) 96,965 Cash and cash equivalents and restricted cash at beginning of year 28,083 204,801 107,836 Cash and cash equivalents and restricted cash at end of year $ 166,236 $ 28,083 $ 204,801 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest, net of capitalized interest $ 31,713 $ 25,219 $ 15,144 Supplemental disclosures of non-cash transactions Accounts payable related to capital improvements 26,912 18,158 16,873 Non-cash issuance of common stock to the deferred compensation plan (5,326) (11,265) (7,651) Lease liability arising from recognition of right-of-use asset — 1,192 3,287 Reconciliation of cash paid for property acquisitions Acquisition of properties $ 512,531 $ 422,298 $ 681,970 Assumption of other assets and liabilities (45,691) (14,740) (37,014) Net cash paid for property acquisitions $ 466,840 $ 407,558 $ 644,956 The accompanying notes are an integral part of these consolidated financial statements. 62 Table of Contents Terreno Realty Corporation Notes to Consolidated Financial Statements Note 1.
Removed
As of December 31, 2022, the buildings and improved land parcels were approximately 98.6% and 92.5% leased, respectively, to 569 customers, the largest of which accounted for approximately 4.3% of our total annualized base rent.
Added
All square feet, acres, occupancy and number of properties disclosed in these notes to the consolidated financial statements are unaudited.
Removed
Our Investment Strategy We acquire, own and operate industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. As described in more detail below, we invest in several types of industrial real estate, including warehouse/distribution, flex (including light industrial and R&D), transshipment and improved land.
Added
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include all of the Company’s accounts and its subsidiaries and all intercompany balances and transactions have been eliminated in consolidation. Use of Estimates.
Removed
We target functional properties in infill locations that may be shared by multiple tenants and that cater to customer demand within the various submarkets in which we operate.
Added
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Capitalization of Costs.
Removed
Industrial Facility General Characteristics Warehouse / distribution (approximately 76.5% of our total annualized base rent as of December 31, 2022) • Single and multiple tenant facilities that typically serve tenants greater than 10,000 square feet of space • Generally less than 20% office space • Typical clear height from 18 feet to 36 feet • May include production/manufacturing areas • Interior access via dock-high and/or grade-level doors • Truck court for large and small truck distribution options, possibly including staging for a high volume of truck activity and/or trailer storage Flex (including light industrial and R&D, approximately 4.1% of our total annualized base rent as of December 31, 2022) • Single and multiple tenant facilities that typically serve tenants less than 10,000 square feet of space • Facilities generally accommodate both office and warehouse/manufacturing activities • Typically has a larger amount of office space and shallower bay depths than warehouse/distribution facilities • Parking consistent with increased office use • Interior access via grade-level and/or dock-high doors • Staging for moderate truck activity • May include a showroom, service center, or assembly/light manufacturing component • Enhanced landscaping Transshipment (approximately 6.8% of our total annualized base rent as of December 31, 2022) • Includes truck terminals and other transshipment facilities, which serve both single and multiple tenants • Typically has a high number of dock-high doors, shallow bay depth and lower clear height 4 Table of Contents • Staging for a high volume of truck activity and trailer storage Improved land (approximately 12.6% of our total annualized base rent as of December 31, 2022) • Used for industrial outdoor storage, including truck, trailer and car parking • May be redeveloped in the future We selected our target markets by drawing upon the experience of our executive management investing and operating in over 50 global industrial markets located in North America, Europe and Asia, the fundamentals of supply and demand, and in anticipation of trends in logistics patterns resulting from population changes, regulatory and physical constraints, changes in technology, e-commerce, the economic and environmental benefits of reducing vehicle miles traveled and other factors.
Added
The Company capitalizes costs directly related to the development, redevelopment, renovation and expansion of its investment in real estate. Costs associated with such projects are capitalized as incurred. If the project is abandoned, these costs are expensed during the period in which the development, redevelopment, renovation or expansion project is abandoned.
Removed
We believe that our target markets have attractive long-term investment attributes.
Added
Costs considered for capitalization include, but are not limited to, construction costs, interest, real estate taxes and insurance, if appropriate. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress.
Removed
We target assets with characteristics that include, but are not limited to, the following: • Located in high population coastal markets; • Close proximity to transportation infrastructure (such as sea ports, airports, highways and railways); • Situated in supply-constrained submarkets with barriers to new industrial development, as a result of physical and/or regulatory constraints; • Functional and flexible layout that can be modified to accommodate single and multiple tenants; • Acquisition price at a discount to the replacement cost of the property; • Potential for enhanced return through re-tenanting or operational or physical improvements; and • Opportunity for higher and better use of the property over time.
Added
In the event that the activities to ready the asset for its intended use are suspended, the capitalization period will cease until such activities are resumed. Costs incurred for maintaining and repairing properties, which do not extend their useful lives, are expensed as incurred.
Removed
In general, we prefer to utilize local third-party property managers for day-to-day property management. We believe outsourcing property management is cost effective, provides us with operational flexibility and is a source of acquisition opportunities.
Added
Interest is capitalized based on actual capital expenditures from the period when development, redevelopment, renovation or expansion commences until the asset is ready for its intended use, at the weighted average borrowing rate during the period. Investments in Real Estate.
Removed
We have directly managed certain of our properties in the past and may do so in the future if we determine such direct property management is in our best interest. We have no current intention to acquire undeveloped or unimproved industrial land or to pursue greenfield ground-up development.
Added
Investments in real estate, including tenant improvements, leasehold improvements and leasing costs, are stated at cost, less accumulated depreciation, unless circumstances indicate that the cost cannot be recovered, in which case, an adjustment to the carrying value of the property is made to reduce it to its estimated fair value.
Removed
Nevertheless, we pursue redevelopment, renovation and expansion opportunities of properties that we own, acquire properties and improved land parcels with the intent to redevelop in the near-term, and acquire adjacent land to expand our existing facilities. We expect that we will continue to acquire the significant majority of our investments as equity interests in individual properties or portfolios of properties.
Added
The Company also reviews the impact of above and below-market leases, in-place leases and lease origination costs for acquisitions and records an intangible asset or liability accordingly. Impairment.
Removed
We may acquire industrial properties through the acquisition of other corporations or entities that own industrial real estate. We will opportunistically make investments in debt secured by industrial real estate that would otherwise meet our investment criteria with the intention of ultimately acquiring the underlying real estate.
Added
Carrying values for financial reporting purposes are reviewed for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable.
Removed
We currently do not intend to target specific percentages of holdings of particular types of industrial properties. This expectation is based upon prevailing market conditions and may change over time in response to different prevailing market conditions. The properties we acquire may be stabilized (fully leased) or unstabilized (have near term lease expirations or be partially or fully vacant).
Added
Examples of such events or changes in circumstances may include classifying an asset to be held for sale, changing the intended hold period or when an asset remains vacant significantly longer than expected. The intended use of an asset either held for sale or held for use can significantly impact how impairment is measured.
Removed
During the period from February 16, 2010 to December 31, 2022, we have stabilized 107 properties. We sell properties from time to time when we believe the prospective total return from a property is particularly low relative to its market value or the market value of the property is significantly greater than its estimated replacement cost.
Added
If an asset is intended to be held for the long-term, the recoverability is based on the undiscounted future cash flows.
Removed
Capital from such sales is reinvested into properties that are expected to provide better prospective returns or returned to shareholders. We have disposed of 29 properties since inception in 2010 for an aggregate sales price of approximately $576.0 million and a total gain of approximately $248.7 million.
Added
If the asset carrying value is not supported on an undiscounted future cash flow basis, then the asset carrying value is measured against the lower of cost or the present value of expected cash flows over the expected hold period.
Removed
Competitive Strengths We believe we distinguish ourselves from our competitors through the following competitive advantages: • Focused Investment Strategy. We invest exclusively in six major coastal U.S. markets and focus on infill locations.
Added
An impairment charge to earnings is recognized for the excess of the asset’s carrying value over the lower of cost or the present values of expected cash flows over the expected hold period. If an asset is intended to be sold, impairment is determined using the estimated fair value less costs to sell.
Removed
We selected our six target markets based upon the experience of our executive management investing and operating in over 50 global industrial markets located in North America, Europe and Asia, the fundamentals of supply and demand, and in anticipation of trends in logistics patterns resulting from population changes, regulatory and physical constraints, changes in technology, e-commerce, the economic and environmental benefits of reducing vehicle miles 5 Table of Contents traveled and other factors.
Added
The estimation of expected future net cash flows is inherently uncertain and relies on assumptions, among other things, regarding current and future economic and market conditions and the availability of capital. The Company determines the estimated fair values based on its assumptions regarding rental rates, lease-up and holding periods, as well as sales prices.
Removed
We have no current intention to acquire undeveloped or unimproved land or pursue greenfield ground-up development, but we pursue redevelopment, renovation and expansion activities. • Highly Aligned Compensation Structure. We believe that executive compensation should be closely aligned with long-term stockholder value creation.
Added
When available, current market information is used to 63 Table of Contents determine capitalization and rental growth rates. If available, current comparative sales values may also be used to establish fair value. When market information is not readily available, the inputs are based on the Company’s understanding of market conditions and the experience of the Company’s management team.
Removed
As a result, the long-term performance-based equity incentive compensation of our executive officers is based exclusively on our total shareholder return exceeding the total shareholder return of the MSCI U.S. REIT Index (RMS) or the FTSE National Association of Real Estate Investment Trusts (“Nareit”) Equity Industrial Index. • Commitment to Strong Corporate Governance.
Added
Actual results could differ significantly from the Company’s estimates. The discount rates used in the fair value estimates represent a rate commensurate with the indicated holding period with a premium layered on for risk. There were no impairment charges recorded to the carrying values of the Company’s properties during the years ended December 31, 2023, 2022 or 2021. Property Acquisitions.
Removed
We are committed to strong corporate governance, as demonstrated by the following: – all members of our board of directors serve annual terms; – we have adopted a majority voting standard in non-contested director elections; – we have opted out of three Maryland anti-takeover provisions and, in the future, we may not opt back in to these provisions without stockholder approval; – we designed our ownership limits solely to protect our status as a REIT and not for the purpose of serving as an anti-takeover device; and – we have no stockholder rights plan.
Added
In accordance with Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not considered a business.
Removed
In the future, we will not adopt a stockholder rights plan unless our stockholders approve in advance the adoption of such a plan or, if adopted by our board of directors, we will submit the stockholder rights plan to our stockholders for a ratification vote within 12 months of adoption or the plan will terminate.
Added
To be a business, the set of acquired activities and assets must include inputs and one or more substantive processes that together contribute to the ability to create outputs. The Company has determined that its real estate property acquisitions will generally be accounted for as asset acquisitions under the clarified definition.
Removed
Our Financing Strategy The primary objective of our financing strategy is to maintain financial flexibility with a conservative capital structure using retained cash flows, proceeds from dispositions of properties, long-term debt and the issuance of common and perpetual preferred stock to finance our growth.
Added
Upon acquisition of a property the Company estimates the fair value of acquired tangible assets (consisting generally of land, buildings and improvements) and intangible assets and liabilities (consisting generally of the above and below-market leases and the origination value of all in-place leases).
Removed
Over the long term, we intend to: • limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding perpetual preferred stock to less than 35% of our total enterprise value; • maintain a fixed charge coverage ratio in excess of 2.0x; • maintain a debt-to-adjusted EBITDA ratio below 6.0x; • limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness; and • have staggered debt maturities that are aligned to our expected average lease term (5-7 years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions.
Added
The Company determines fair values using Level 3 inputs such as replacement cost, estimated cash flow projections and other valuation techniques and applying appropriate discount and capitalization rates based on available market information. Mortgage loans assumed in connection with acquisitions are recorded at their fair value using current market interest rates for similar debt at the date of acquisition.
Removed
We intend to preserve a flexible capital structure with a long-term goal to maintain our investment grade rating and be in a position to issue additional unsecured debt and perpetual preferred stock. Fitch Ratings assigned us an issuer rating of BBB with a stable outlook.
Added
Acquisition-related costs associated with asset acquisitions are capitalized to individual tangible and intangible assets and liabilities assumed on a relative fair value basis and acquisition-related costs associated with business combinations are expensed as incurred. The fair value of the tangible assets is determined by valuing the property as if it were vacant.
Removed
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. There can be no assurance that we will be able to maintain our current credit rating.
Added
Land values are derived from current comparative sales values, when available, or management’s estimates of the fair value based on market conditions and the experience of the Company’s management team. Building and improvement values are calculated as replacement cost less depreciation, or management’s estimates of the fair value of these assets using discounted cash flow analyses or similar methods.
Removed
Our credit rating can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. In the event our current credit rating is downgraded, it may become difficult or expensive to obtain additional financing or refinance existing obligations and commitments.
Added
The fair value of the above and below-market leases is based on the present value of the difference between the contractual amounts to be received pursuant to the acquired leases (using a discount rate that reflects the risks associated with the acquired leases) and the Company’s estimate of the market lease rates measured over a period equal to the remaining term of the leases plus the term of any below-market fixed rate renewal options.
Removed
We intend to primarily utilize senior unsecured notes, term loans, credit facilities, dispositions of properties, and proceeds from the issuance of common stock and perpetual preferred stock. We may also assume debt in connection with property acquisitions which may have a higher loan-to-value ratio.
Added
The above and below-market lease values are amortized to rental revenues over the remaining initial term plus the term of any below-market fixed rate renewal options that are considered bargain renewal options of the respective leases.
Removed
Our Corporate Structure We are a Maryland corporation formed on November 6, 2009 and have been publicly held and subject to U.S. Securities and Exchange Commission (“SEC”) reporting obligations since 2010. We are not structured as an Umbrella Partnership Real Estate Investment Trust, or UPREIT, although we could put in place a similar structure to facilitate an acquisition if needed.
Added
The total net impact to rental revenues due to the amortization of above and below-market leases was a net increase of approximately $13.9 million, $16.3 million and $7.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. The origination value of in-place leases is based on costs to execute similar leases, including commissions and other related costs.
Removed
We believe that our organization and method of operation has enabled and will continue to enable us to meet the requirements for qualification and taxation as a REIT for federal income tax purposes.
Added
The origination value of in-place leases also includes real estate taxes, insurance and an estimate of lost rental revenue at market rates during the estimated time required to lease up the property from vacant to the occupancy level at the date of acquisition.
Removed
Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income or property and the income of our taxable REIT subsidiaries, if any, will be subject to taxation at regular corporate rates. We do not currently own any taxable REIT subsidiaries but may in the future.
Added
The remaining weighted average lease term related to these intangible assets and liabilities as of December 31, 2023 was 6.5 years.
Removed
Competition We believe the current market for industrial real estate acquisitions to be highly competitive.
Added
As of December 31, 2023 and 2022, the Company’s intangible assets and liabilities, including properties held for sale (if any), consisted of the following (dollars in thousands): December 31, 2023 December 31, 2022 Gross Accumulated Amortization Net Gross Accumulated Amortization Net In-place leases $ 143,444 $ (93,476) $ 49,968 $ 119,959 $ (83,222) $ 36,737 Above-market leases 3,885 (3,463) 422 3,586 (3,558) 28 Below-market leases (137,047) 52,329 (84,718) (95,638) 39,765 (55,873) Total $ 10,282 $ (44,610) $ (34,328) $ 27,907 $ (47,015) $ (19,108) 64 Table of Contents Projected net amortization of the intangible assets and liabilities for the next five years and thereafter as of December 31, 2023 is as follows (dollars in thousands): 2024 $ 250 2025 (1,739) 2026 (2,686) 2027 (3,061) 2028 (3,015) Thereafter (24,077) Total $ (34,328) Depreciation and Useful Lives of Real Estate and Intangible Assets.
Removed
We compete for real property investments with pension funds and their advisors, bank and insurance company investment accounts, other public and private real estate investment companies, including other REITs, real estate limited partnerships, owner-users, individuals and other entities engaged in real estate investment activities, some of which have greater financial resources than we do.
Added
Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets or liabilities. The following table reflects the standard depreciable lives typically used to compute depreciation and amortization. However, such depreciable lives may be different based on the estimated useful life of such assets or liabilities.
Removed
We believe the leasing of real estate to be competitive. We experience competition for customers from owners and managers of competing properties. As a result, we may have to provide free rental periods, incur charges for tenant improvements or offer other inducements, all of which may have an adverse impact on our results of operations.
Added
Description Standard Depreciable Life Land Not depreciated Building 40 years Building Improvements 5-40 years Tenant Improvements Shorter of lease term or useful life Leasing Costs Lease term In-place Leases Lease term Above/Below-Market Leases Lease term Held for Sale Assets.
Removed
Governmental Regulations Compliance with various governmental regulations has an impact on our business, including our capital expenditures, earnings and competitive position, which can be material.
Added
The Company considers a property to be held for sale when it meets the criteria established under Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment (See “Note 5 - Held for Sale/Disposed Assets”).
Removed
We incur costs to monitor and take actions to comply with governmental regulations that are applicable to our business, which include, among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage and other regulations relating to real property and the Americans with Disabilities Act of 1990.
Added
Properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale. Cash and Cash Equivalents.
Removed
In addition to the discussion below, see “Item 1A – Risk Factors” for a discussion of material risks to us, including, to the extent material, to our competitive position, relating to governmental regulations, and see “Item 7.
Added
Cash and cash equivalents consists of cash held in a major banking institution and other highly liquid short-term investments with original maturities of three months or less. Cash equivalents are generally invested in U.S. government securities, government agency securities or money market accounts. Restricted Cash.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations” together with our audited consolidated financial statements and the related notes thereto for a discussion of material information relevant to an assessment of our financial condition and results of operations, including, to the extent material, the effects that compliance with governmental regulations may have upon our capital expenditures and earnings.
Added
Restricted cash includes cash held in escrow in connection with property acquisitions and reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain mortgage loan obligations.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
54 edited+8 added−8 removed191 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
54 edited+8 added−8 removed191 unchanged
2022 filing
2023 filing
Biggest changeWe have a credit facility, which consists of a $100.0 million term loan that matures in January 2027, a $100.0 million term loan that matures in January 2028 and a revolving credit facility with $400.0 million in borrowing capacity that matures in August 2025. We also have $575.0 million of senior unsecured notes outstanding.
Biggest changeThe agreements relating to our existing debt contain, and we expect that agreements relating to our future indebtedness will contain, covenants that could limit our operations and our ability to make distributions to our stockholders . 13 Table of Contents We have a credit facility, which consists of a $100.0 million term loan that matures in January 2027, a $100.0 million term loan that matures in January 2028 and a revolving credit facility with $400.0 million in borrowing capacity that matures in August 2025.
Factors that may affect real estate values and cash flows include: • downturns in national, regional and local economic conditions (particularly increases in unemployment); • the attractiveness of our properties to potential tenants and competition from other industrial properties; • changes in supply of, or demand for, similar or competing properties in an area; 15 Table of Contents • bankruptcies, financial difficulties or lease defaults by the tenants of our properties; • adverse capital and credit market conditions, which may restrict our operating activities; • changes in interest rates, availability and terms of debt financing, including periods of high or rising interest rates; • changes in operating costs and expenses and our ability to control rents, including periods of high and persistent inflation; • changes in, or increased costs of compliance with, governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder; • increasing costs of maintaining, insuring, renovating and making improvements to our properties; • unanticipated changes in costs associated with known adverse environmental conditions or retained liabilities for such conditions; • tenant turnover; • re-leasing that may require concessions or reduced rental rates under the new leases due to reduced demand; • our ability to renovate and reposition our properties due to changes in the business and logistical needs of our tenants; • technological changes, such as reconfiguration of supply chains, autonomous vehicles, robotics, 3D printing or other technologies; • disruptions in the global supply chain caused by political, regulatory or other factors, including terrorism and domestic terrorist attacks; • disruptions to political, governmental or regulatory systems, including shutdowns of the government and its agencies; and • the effects of deflation, including credit market dislocation, weakened consumer demand and a decline in general price levels.
Factors that may affect real estate values and cash flows include: • downturns in national, regional and local economic conditions (particularly increases in unemployment); • the attractiveness of our properties to potential tenants and competition from other industrial properties; • changes in supply of, or demand for, similar or competing properties in an area; • bankruptcies, financial difficulties or lease defaults by the tenants of our properties; • adverse capital and credit market conditions, which may restrict our operating activities; • changes in interest rates, availability and terms of debt financing, including periods of high or rising interest rates; • changes in operating costs and expenses and our ability to control rents, including periods of high and persistent inflation; • changes in, or increased costs of compliance with, governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder; • increasing costs of maintaining, insuring, renovating and making improvements to our properties; 15 Table of Contents • unanticipated changes in costs associated with known adverse environmental conditions or retained liabilities for such conditions; • tenant turnover; • re-leasing that may require concessions or reduced rental rates under the new leases due to reduced demand; • our ability to renovate and reposition our properties due to changes in the business and logistical needs of our tenants; • technological changes, such as reconfiguration of supply chains, autonomous vehicles, robotics, 3D printing or other technologies; • disruptions in the global supply chain caused by political, regulatory or other factors, including terrorism and domestic terrorist attacks; • disruptions to political, governmental or regulatory systems, including shutdowns of the government and its agencies; and • the effects of deflation, including credit market dislocation, weakened consumer demand and a decline in general price levels.
Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting or deterring a third-party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • “ Business Combination ” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (as defined under the MGCL) or an affiliate of an interested stockholder for five years after 19 Table of Contents the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose special stockholder voting requirements unless certain minimum price conditions are satisfied; and • “ Control Share ” provisions that provide that “control shares” of our company acquired in a “control share acquisition” (each as defined under the MGCL) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting or deterring a third-party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • “ Business Combination ” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (as defined under the MGCL) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose special stockholder voting requirements unless certain minimum price conditions are satisfied; and • “ Control Share ” provisions that provide that “control shares” of our company acquired in a “control share acquisition” (each as defined under the MGCL) have no voting rights except to the extent approved by our 19 Table of Contents stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments.
Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, the effect of non-deductible capital expenditures, the creation of reserves, required debt service or amortization payments.
In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by unsecured debt of publicly offered REITs, in each case, at the close of each calendar quarter.
In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs and no more than 25% of the value of our assets can be represented by unsecured debt of publicly offered REITs, in each case, at the close of each calendar quarter.
If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments.
If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of such quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
We may have no recourse, or only limited recourse, with respect to such unknown liabilities or may be unable to secure insurance coverage on the property in a sufficient amount of cover the liability, or at all.
We may have no recourse, or only limited recourse, with respect to such unknown liabilities or may be unable to secure insurance coverage on the property in a sufficient amount to cover the liability, or at all.
This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included a more significant portion of other sectors of the real estate industry. 9 Table of Contents COVID-19 or any future pandemic, epidemic or outbreak of any other highly infectious disease could have an adverse effect on our business, financial condition, results of operations and cash flows and the business, financial condition, results of operations and cash flows of our tenants.
This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included a more significant portion of other sectors of the real estate industry. 9 Table of Contents Any future pandemic, epidemic or outbreak of any highly infectious disease could have an adverse effect on our business, financial condition, results of operations and cash flows and the business, financial condition, results of operations and cash flows of our tenants.
Although we would expect to acquire the secured property upon a borrower’s default, there is no assurance that we will successfully foreclose on a property, and any such foreclosure could result in significant expenses. Adverse changes in our credit rating could negatively affect our financing activity. Fitch Ratings assigned us an issuer rating of BBB with a stable outlook.
Although we would expect to acquire the secured property upon a borrower’s default, there is no assurance that we will successfully foreclose on a property, and any such foreclosure could result in significant expenses. Adverse changes in our credit rating could negatively affect our financing activity. Fitch Ratings assigned us an issuer rating of BBB with a positive outlook.
Further, such a loss could be negatively perceived in the capital markets, which may also adversely impact our financial condition and cash flows. We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
Further, such a loss could be negatively perceived in the capital markets, which may also adversely impact our financial condition and cash flows. We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (“IT”) networks and related systems.
As a result, our ability to retain earnings to fund acquisitions, redevelopment, renovation and expansion, if any, or other capital expenditures will be limited.
As a result, our ability to retain earnings to fund acquisitions, development, redevelopment, renovation and expansion, if any, or other capital expenditures will be limited.
Our redevelopment, renovation or expansion strategies may not be successful. We may pursue redevelopment opportunities or construct expansions or improvements of industrial properties that we own.
Our development, redevelopment, renovation or expansion strategies may not be successful. We may pursue development or redevelopment opportunities or construct expansions or improvements of industrial properties that we own.
We also intend to maintain a fixed charge coverage ratio in excess of 2.0x and a debt-to-adjusted EBITDA ratio below 6.0x and limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness but our board of directors may modify or eliminate these limitations at any time without the approval of our stockholders.
We also intend to maintain a fixed charge coverage ratio in excess of 2.0x and a net debt-to-adjusted EBITDA ratio below 5.0x and limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness but our board of directors may modify or eliminate these limitations at any time without the approval of our stockholders.
COVID-19, or any future pandemic, epidemic or outbreak of any other highly infectious disease, may materially and adversely affect our businesses, financial condition, results of operations and cash flows and may also have the effect of heightening many of the risks described below and within this “Risk Factors” section, including: • the complete or partial closure of, or other operational restrictions or other issues at, one or more of our properties resulting from government or tenant action has had, and could continue to have, a material adverse impact on our operations and those of our tenants and third-party property managers; • reduced economic activity impacting the businesses, financial condition and liquidity of our tenants, has caused, and could continue to cause, one or more of our tenants, including certain significant tenants, or one or more of our third-party managers, to be unable to meet their rent payment or other obligations to us in full, or at all, to otherwise seek modifications of such obligations, including rent payment deferrals, or to file for bankruptcy protection; • our inability to renew leases, lease vacant space, including vacant space from tenant defaults, or re-lease space as leases expire on favorable terms, or at all, including in the current slowing leasing environment, which could result in lower rental revenues or cause interruptions or delays in the receipt, or non-receipt, of rental payments; • severe disruption and instability in the U.S. and global financial markets or deteriorations in credit and financing conditions could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay debt on a timely basis; and • disruptions in the supply of materials or products or the inability of contractors to perform on a timely basis, or at all, including as a result of restrictions on construction activity, could cause delays in completing ongoing or future construction or re-development projects.
Any future pandemic, epidemic or outbreak of any highly infectious disease may materially and adversely affect our businesses, financial condition, results of operations and cash flows and may also have the effect of heightening many of the risks described below and within this “Risk Factors” section, including: • the complete or partial closure of, or other operational restrictions or other issues at, one or more of our properties resulting from government or tenant action could have a material adverse impact on our operations and those of our tenants and third-party property managers; • reduced economic activity impacting the businesses, financial condition and liquidity of our tenants could cause one or more of our tenants, including certain significant tenants, or one or more of our third-party managers, to be unable to meet their rent payment or other obligations to us in full, or at all, to otherwise seek modifications of such obligations, including rent payment deferrals, or to file for bankruptcy protection; • our inability to renew leases, lease vacant space, including vacant space from tenant defaults, or re-lease space as leases expire on favorable terms, or at all, which could result in lower rental revenues or cause interruptions or delays in the receipt, or non-receipt, of rental payments; • severe disruption and instability in the U.S. and global financial markets or deteriorations in credit and financing conditions could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay debt on a timely basis; and • disruptions in the supply of materials or products or the inability of contractors to perform on a timely basis, or at all, including as a result of restrictions on construction activity, could cause delays in completing ongoing or future construction or re-development projects.
Even if none of our environmental assessments of our properties reveal an environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations taken as a whole, we cannot give any assurance that such conditions do not exist or may not arise in the future.
Even if none of our environmental assessments of our properties reveal an environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations taken 17 Table of Contents as a whole, we cannot give any assurance that such conditions do not exist or may not arise in the future.
The remainder of our investments in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the total voting power of the outstanding securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
The remainder of our investments in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the total voting power or more than 10% of the total value, in each case, of the outstanding securities of any one issuer.
We are required to comply with many regulations made by various regulatory entities, including (but not limited to) the Americans with Disabilities Act, The Fair Housing Amendment of 1988, various California energy efficiency standards such as The Energy Efficiency Standards for Residential and Nonresidential Buildings, Title 24, and/or other similar regulations.
We are required to comply with many regulations made by various regulatory entities, including (but not limited to) the Americans with Disabilities Act, The Fair Housing Amendment of 1988, various California energy efficiency standards such as 18 Table of Contents The Energy Efficiency Standards for Residential and Nonresidential Buildings, Title 24, and/or other similar regulations.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock. Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock. 20 Table of Contents Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
If a U.S. stockholder sells the stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale.
If a U.S. stockholder sells the stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the 21 Table of Contents dividend, depending on the market price of our stock at the time of the sale.
However, there are certain losses, including losses from floods, hurricanes, fires, earthquakes and other natural disasters, acts of war, acts of 16 Table of Contents terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so.
However, there are certain losses, including losses from floods, hurricanes, fires, earthquakes and other natural disasters, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock. 22 Table of Contents At any time, the federal income tax laws governing REITs (or otherwise affecting our business or affecting our stockholders) or the administrative interpretations of those laws may be amended.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock. At any time, the federal income tax laws governing REITs (or otherwise affecting our business or affecting our stockholders) or the administrative interpretations of those laws may be amended.
We face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, people with access or who gain access to our systems and other significant disruptions of our IT networks and related systems.
We face risks associated with security breaches, whether through cyber-attacks or intrusions, malware, computer viruses, attachments to e-mails, people with access or who gain access to our systems and other significant disruptions of our IT networks and related systems.
In the future, we will rely on equity and debt financing, including issuances of common and perpetual preferred stock, borrowings under our revolving credit facility, term loans, issuances of unsecured debt securities and debt secured by individual 12 Table of Contents properties or pools of properties, and recycling of capital to finance our acquisition, redevelopment, renovation and expansion activities and for working capital.
In the future, we will rely on equity and debt financing, including issuances of common and perpetual preferred stock, borrowings under our revolving credit facility, term loans, issuances of unsecured debt securities and debt secured by individual properties or pools of properties, and recycling of capital to finance our acquisition, development, redevelopment, renovation and expansion activities and for working capital.
The potential application of the prohibited transactions tax could cause us to forego potential dispositions of property or to forego other opportunities that might otherwise be attractive to us, or to hold investments or undertake such dispositions or other opportunities through a taxable REIT subsidiary (“TRS”), which would generally result in corporate income taxes being incurred by such TRS.
The potential application of the prohibited transactions tax could cause us to forego potential dispositions of property or to forego other opportunities that might otherwise be attractive to us, or to hold investments or undertake such dispositions or other opportunities through a taxable REIT subsidiary (“TRS”), which would generally result in such TRS incurring corporate income taxes.
In addition, if we are unable to renew leases or re-lease a property, the resale value of 10 Table of Contents that property could be diminished because the market value of a particular property will depend in part upon the value of the leases of such property.
In addition, if we are unable to renew leases or re-lease a property, the resale value of that property could be diminished because the market value of a particular property will depend in part upon the value of the leases of such property.
We may not acquire the industrial properties that we have entered into agreements or non-binding letters of intent to acquire. We have entered, and may in the future enter, into agreements and non-binding letters of intent with third-party sellers to acquire properties as more fully described under the heading “Material Cash Commitments” in this Annual Report on Form 10-K.
We have entered, and may in the future enter, into agreements and non-binding letters of intent with third-party sellers to acquire properties as more fully described under the heading “Material Cash Commitments” in this Annual Report on Form 10-K.
We may choose to pay dividends in our stock instead of cash, in which case stockholders may be required to pay income taxes in excess of any cash dividends they receive. 21 Table of Contents We may distribute taxable dividends that are payable in stock.
We may choose to pay dividends in our stock instead of cash, in which case stockholders may be required to pay income taxes in excess of any cash dividends they receive. We may distribute taxable dividends that are payable in stock.
We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation. General Risks Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal controls over financial reporting.
We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation. 22 Table of Contents General Risks Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal controls over financial reporting.
Any downturn in the economy in the real estate market or any of our markets and any failure to accurately predict the timing of any economic improvement in these markets could cause our operations and our revenue and cash available for distribution to our stockholders to be materially adversely affected.
Any downturn in the economy in the real estate market or any of the markets in which we own properties and any failure to accurately predict the timing of any economic improvement in these markets could cause our operations and our revenue and cash available for distribution to our stockholders to be materially adversely affected.
Additionally, third-party security events at our vendors or other service providers could also impact our data and operations via unauthorized access to information or disruption of services.
Additionally, third-party security events at our vendors or other service providers could impact our data and operations via unauthorized access to, or loss or other compromise of information or disruption of services.
If any of the following risks occur, our business, financial condition, results of operations, cash flows and our ability to pay distributions on, and the per share trading price of, our common stock could be adversely affected.
If any of the following risks occur, our business, financial condition, results of operations and cash flows, our ability to satisfy our debt service obligations and our ability to pay distributions on, and the per share trading price of, our common stock could be adversely affected.
Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate a property after it has been damaged or destroyed.
Inflation, changes in building codes and ordinances, environmental considerations 16 Table of Contents and other factors might also keep us from using insurance proceeds to replace or renovate a property after it has been damaged or destroyed.
If we fail to qualify as a REIT in any taxable year, and are unable to obtain relief under certain statutory provisions, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because: • we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to federal and state income tax at regular corporate rates; and • we could not elect to qualify as a REIT for four taxable years following the year during which we were disqualified. 20 Table of Contents In addition, we would no longer be required to pay distributions.
If we fail to qualify as a REIT in any taxable year, and are unable to obtain relief under certain statutory provisions, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because: • we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to federal and state income tax at regular corporate rates; and • we could not elect to qualify as a REIT for four taxable years following the year during which we were disqualified.
These activities are subject to risks, including, but not limited to, the risks that: we will expend money and time on projects that do not perform as expected; the actual construction or operating costs, including labor and material costs, will be higher than originally estimated; we may experience delays in obtaining construction materials; we may fail to obtain, or experience delays in obtaining, any necessary permits and authorizations; permits and authorizations may be subject to stringent conditions that could impede or delay our progress; we are unable to complete construction on the timeframe we expect, or at 11 Table of Contents all; occupancy and rental rates may not meet expectations; and we may be unable to obtain financing on favorable terms, or at all, for such projects.
These activities are subject to risks, including, but not limited to, the risks that: we will expend money and time on projects that do not perform as expected; the actual construction or operating costs, including labor and material costs, will be higher than originally estimated; we may experience delays in obtaining construction materials; we may fail to obtain, or experience delays in obtaining, any necessary permits and authorizations; permits and authorizations may be subject to stringent conditions that could impede or delay our progress; we are unable to complete construction on the timeframe we expect, or at all; occupancy and rental rates may not meet expectations; and we may be unable to obtain financing on favorable terms, or at all, for such projects. 11 Table of Contents We may not acquire the industrial properties that we have entered into agreements or non-binding letters of intent to acquire.
If we do not have sufficient funds to repay existing or future debt, including debt under our credit facility and senior unsecured notes, it may be necessary to refinance the debt through additional debt or additional equity financings.
If we do not have sufficient funds to repay existing or future debt at maturity, including debt under our credit facility, term loans and senior unsecured notes, it may be necessary to refinance the debt through additional debt or raise additional funds through equity financings.
If, at the time of any refinancing, prevailing interest rates or other factors result in higher interest rates on refinancings, the increase in interest expense would adversely affect our cash flows, and, consequently, cash available for distribution to our stockholders.
For example, if prevailing interest rates or other factors result in higher interest rates on refinancings, the increase in interest expense would adversely affect our cash flows, and, consequently, cash available for distribution to our stockholders.
When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings in the future, it is likely that, in order to attract one or more new tenants, we will be required to expend funds to construct new tenant improvements in the vacated space.
We may be required to fund future tenant improvements, and we may not have funding for those improvements. 10 Table of Contents When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings in the future, it is likely that, in order to attract one or more new tenants, we will be required to expend funds to construct new tenant improvements in the vacated space.
The extent to which COVID-19, or any future pandemic, epidemic or outbreak of any other highly infectious disease, impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted accurately, including the scope, severity and duration of such pandemic, the emergence and characteristics of new variants, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.
The extent to which any future pandemic, epidemic or outbreak of any highly infectious disease, impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted accurately, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.
In addition, in recent months, we have observed increased economic uncertainty in the United States and abroad that could lead to periods of economic slowdown or recession, continued inflation and higher interest rates or declining demand for real estate, and the occurrence of such events or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would materially adversely affect our financial condition and results of operations.
If such uncertainty continues or is heightened, it could lead to sustained periods of economic slowdown or recession, continued inflation and higher interest rates or declining demand for real estate, and the occurrence of such events or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would materially adversely affect our financial condition and results of operations.
For example, as of December 31, 2022, approximately 17.7% of our rentable square feet and approximately 42.2% of our improved land parcels were located in Northern New Jersey/New York City, representing a combined percentage of approximately 24.9% of our total annualized base rent.
For example, as of December 31, 2023, approximately 16.3% of our rentable square feet and approximately 44.6% of our improved land parcels were located in Northern New Jersey/New York City, representing a combined percentage of approximately 24.6% of our total annualized base rent.
If we are unable to obtain equity or debt financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected.
If we are unable to obtain equity or debt financing from these or other sources, 12 Table of Contents or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. Any additional debt we incur will increase our leverage and likelihood of default.
These laws and regulations may require us to make improvements to our existing properties or result in increased operating costs that we may not be able to effectively pass on to our tenants.
Further, such laws and regulations may require us to make improvements to our existing properties or result in increased capital expenditures in order to comply with such regulations, as well as increased operating costs that we may not be able to effectively pass on to our tenants.
Adverse changes in our credit rating could negatively impact our refinancing activities, our ability to manage our debt maturities, our future growth, our financial condition, the market price of our stock and our acquisition activities. Failure to hedge effectively against interest rate changes may adversely affect results of operations.
Adverse changes in our credit rating could negatively impact our refinancing activities, our ability to manage our debt maturities, our future growth, our financial condition, the market price of our stock and our acquisition activities.
As of December 31, 2022, we had total debt, net of deferred financing costs, of approximately $770.8 million, which consisted of revolving credit facility borrowings, term loan borrowings, senior unsecured note borrowings and mortgage loans payable (if any).
As of December 31, 2023, we had total debt, net of deferred financing costs, of approximately $771.6 million, which consisted of revolving credit facility borrowings, term loan borrowings and senior unsecured note borrowings.
We have agreed to guarantee the obligations 13 Table of Contents of the borrower (a wholly-owned subsidiary) under our revolving credit facility, our term loan and our senior unsecured notes.
We also have $575.0 million of senior unsecured notes outstanding. We have agreed to guarantee the obligations of the borrower (a wholly-owned subsidiary) under our revolving credit facility, our term loans and our senior unsecured notes.
Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties. 17 Table of Contents We generally obtain Phase I environmental site assessments on each property prior to acquiring it and we generally anticipate that the properties that we may acquire in the future may be subject to a Phase I or similar environmental assessment by independent environmental consultants at the time of acquisition.
We generally obtain Phase I environmental site assessments on each property prior to acquiring it and we generally anticipate that the properties that we may acquire in the future may be subject to a Phase I or similar environmental assessment by independent environmental consultants at the time of acquisition.
In addition, many state and local governments are adopting or considering adopting regulations requiring that property owners and developers include in their development or redevelopment plans resiliency measures to address climate-change related risks.
In addition, many state and local governments are adopting or considering adopting regulations requiring that property owners and developers include in their development or redevelopment plans resiliency measures to address climate-change related risks. If such regulations apply to any of our properties, we may be required to incur substantial costs to address such regulations.
Any future hedging arrangements we enter into may 14 Table of Contents not be effective in reducing our exposure to interest rate changes and a court could rule that such arrangements are not legally enforceable.
We do not currently have any hedging arrangements in place but have previously used interest rate caps to hedge the variable cash flows associated with our term loans. Any future hedging arrangements we enter into may not be effective in reducing our exposure to interest rate changes and a court could rule that such arrangements are not legally enforceable.
If we are unable to refinance our debt on acceptable terms, we may be forced to dispose of industrial properties on disadvantageous terms, potentially resulting in losses. We may also place mortgages on our properties that we own to secure a revolving credit facility or other debt.
If we are unable to refinance our debt on acceptable terms, we may be forced to choose from a number of unfavorable options, including agreeing to otherwise unfavorable financing terms on new debt or disposing of one or more of our industrial properties on disadvantageous terms, potentially resulting in losses.
To the extent we cannot meet any future debt service obligations, we will risk losing some or all of our industrial properties that may be pledged to secure our obligations to foreclosure. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies.
Hedging may reduce overall returns on our investments and the failure to hedge effectively against interest rate changes may materially adversely affect our results of operations. The discontinuation of London Interbank Offered Rate (“LIBOR”) and the replacement of LIBOR with an alternative reference rate may adversely affect our borrowing costs and could impact our business and results of operations.
Hedging may reduce overall returns on our investments and the failure to hedge effectively against interest rate changes may materially adversely affect our results of operations. Our existing stockholders may experience dilution if we issue additional common stock.
If such regulations apply to any of our properties, we may be required to incur substantial costs to address such regulations. 18 Table of Contents Compliance or failure to comply with regulatory requirements could result in substantial costs.
Compliance or failure to comply with regulatory requirements could result in substantial costs.
We may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as cap contracts and swap agreements. We do not currently have any hedging arrangements in place but have previously used interest rate caps to hedge the variable cash flows associated with our term loans.
Failure to hedge effectively against interest rate changes may adversely affect results of operations. 14 Table of Contents We may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as cap contracts and swap agreements.
Removed
The global COVID-19 pandemic, including the emergence of various variants, has caused, and could continue to cause, significant disruptions to the U.S. and global economies and has contributed, and may continue to contribute, to significant volatility and negative pressure in financial markets.
Added
On October 16, 2023, DirectBuy Home Improvement, one of our top 20 customers, filed for Chapter 11 bankruptcy. We had fully reserved for all of their receivables as of December 31, 2023 and any ultimate recovery of past due rent is undetermined at this time.
Removed
We may be required to fund future tenant improvements, and we may not have funding for those improvements.
Added
Certain of our debt, such as our term loans and senior unsecured notes, require that the principal be repaid at the maturity of the loan in a “balloon payment.” As of December 31, 2023, the financing arrangements of our outstanding indebtedness could require us to make lump-sum or “balloon” payments of approximately $775.0 million at maturity dates that range from 2024 to 2031.
Removed
The agreements relating to our existing debt contain, and we expect that agreements relating to our future indebtedness will contain, covenants that could limit our operations and our ability to make distributions to our stockholders .
Added
If the credit environment is constrained at the time of any refinancing, we could have a very difficult time refinancing debt on acceptable terms, or at all.
Removed
We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023.
Added
We may also place mortgages on our properties that we own to secure a revolving credit facility or other debt. To the extent we cannot meet any future debt service obligations, we will risk losing some or all of our industrial properties that may be pledged to secure our obligations to foreclosure.
Removed
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or hedging transactions, but as our contracts indexed to LIBOR are converted to Secured Overnight Financing Rate (“SOFR”), the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest or hedging costs that are higher than if LIBOR remained available.
Added
In addition, throughout 2023, we observed economic and geopolitical uncertainty in the United States and abroad.
Removed
Additionally, although SOFR is the Alternative Reference Rates Committee’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest or hedging costs for us.
Added
Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.
Removed
It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR.
Added
In addition, laws and regulations at the federal, state and local level aimed at increasing climate-related disclosures, including the rules proposed by the SEC and the legislation recently enacted in the state of California, may increase compliance and data collection costs if, and when, such laws and regulations become effective.
Removed
As of December 31, 2022, each of the agreements governing our variable rate debt either have been transitioned to SOFR or provide for the replacement of LIBOR if it becomes unavailable during the term of such agreement. Our existing stockholders may experience dilution if we issue additional common stock.
Added
In addition, we would no longer be required to pay distributions.
Item 2. Properties
Properties — owned and leased real estate
13 edited+2 added−1 removed8 unchanged
Item 2. Properties
Properties — owned and leased real estate
13 edited+2 added−1 removed8 unchanged
2022 filing
2023 filing
Biggest changeAs needed, we hold discussions with the tenant’s management about their business and we conduct site visits of the tenant’s operations. 26 Table of Contents Our top 20 customers based on annualized base rent as of December 31, 2022 are as follows: Customer Leases Rentable Square Feet % of Total Rentable Square Feet Annualized Base Rent (in thousands) 1 % of Total Annualized Base Rent Improved Land Acreage 1 Amazon.com 6 471,880 3.1 % $ 9,444 4.3 % 6.2 2 FedEx Corporation 6 246,779 1.6 % 4,943 2.3 % 7.7 3 Danaher 3 171,707 1.1 % 3,960 1.8 % — 4 United States Government 8 300,732 2.0 % 3,929 1.8 % — 5 District of Columbia 8 245,888 1.7 % 3,480 1.7 % — 6 DirectBuy Home Improvement 1 230,891 1.5 % 3,463 1.6 % — 7 Allied Brothers Intermodal Inc. 1 30,978 0.2 % 2,580 1.2 % — 8 O'Neill Logistics 2 237,692 1.6 % 2,131 1.0 % — 9 Port Kearny Security, Inc. 1 — — % 2,040 0.9 % 16.9 10 B&B Granite Block Sales, LLC 1 — — % 1,944 0.9 % 7.2 11 Costco-Innovel Solutions LLC 1 219,910 1.4 % 1,926 0.9 % — 12 Hanjin International America, Inc. and Hanjin Transportation Co., LTD 1 114,061 0.7 % 1,848 0.8 % — 13 XPO Logistics 2 180,717 1.2 % 1,843 0.8 % — 14 Team Alliance Logistics Inc.
Biggest changeAs needed, we hold discussions with the tenant’s management about their business and we conduct site visits of the tenant’s operations. 26 Table of Contents Our top 20 customers based on annualized base rent as of December 31, 2023 are as follows: Customer Leases Rentable Square Feet % of Total Rentable Square Feet Improved Land Acreage Annualized Base Rent (in thousands) 1 % of Total Annualized Base Rent 2 1 Amazon.com 5 471,880 2.9 % 2.8 $ 9,160 3.6 % 2 FedEx Corporation 5 242,889 1.5 % 7.7 5,181 2.0 % 3 O'Neill Logistics 2 429,692 2.7 % — 4,403 1.7 % 4 United States Government 8 300,732 1.9 % — 4,212 1.7 % 5 Danaher 3 171,707 1.1 % — 4,078 1.6 % 6 District of Columbia 8 245,888 1.5 % — 3,585 1.4 % 7 DirectBuy Home Improvement 3 1 230,891 1.4 % — 3,585 1.4 % 8 International Cargo Terminals Inc. 1 31,601 0.2 % — 3,300 1.3 % 9 Motivate LLC 3 101,234 0.6 % — 2,973 1.2 % 10 Meta Platforms, Inc. 1 225,678 1.4 % — 2,811 1.1 % 11 Lucid USA, Inc. 1 161,680 1.0 % — 2,598 1.0 % 12 Northrop Grumman Systems Corporation 2 148,458 0.9 % — 2,417 1.0 % 13 Sarcona Management Corporation 2 28,124 0.2 % 4.9 2,295 0.9 % 14 Port Kearny Security, Inc. 1 — — % 16.9 2,280 0.9 % 15 Triton Logistics Inc. 1 190,907 1.2 % — 2,273 0.9 % 16 Bar Logistics, Inc. 2 243,513 1.5 % — 2,180 0.9 % 17 L3 Harris Technologies, Inc. 2 170,114 1.1 % — 2,163 0.9 % 18 B&B Granite Block Sales, LLC 1 — — % 7.2 2,160 0.9 % 19 JAM'N Logistics Inc. 1 110,336 0.7 % — 2,145 0.8 % 20 Costco-Innovel Solutions LLC 1 219,910 1.4 % — 1,984 0.8 % Total 51 3,725,234 23.2 % 39.5 $ 65,783 26.0 % 1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2023, multiplied by 12. 2 Total annualized base rent is calculated as contractual monthly base rent per the leases, for all buildings and improved land parcels, excluding any partial or full rent abatements, as of December 31, 2023, multiplied by 12. 3 On October 16, 2023, DirectBuy Home Improvement filed for Chapter 11 bankruptcy and we had fully reserved for all receivables as of December 31, 2023.
Further, re-leased/renewed rental rates in a particular market may not be consistent with rental rates across our portfolio as a whole and re-leased/renewed rental rates for particular properties within a market may not be consistent with rental rates across our portfolio within a particular market, in each case due to a number of factors, including local real estate conditions, local supply and demand for industrial space, the condition of the property, the impact of leasing incentives, including free rent and tenant improvements, and whether the property, or space within the property, has been redeveloped.
Further, re-leased/renewed rental rates in a particular market may not be consistent with rental rates across our portfolio as a whole and re-leased/renewed rental rates for particular properties within a market may not be consistent with rental rates across our portfolio within a particular market, in each case due to a number of factors, including local real estate conditions, local supply and demand for industrial space, the condition of the property, the impact of leasing incentives, including free rent and tenant improvements, and whether the property, or space within the property, has been redeveloped. 28 Table of Contents
We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2023 expirations will be above the rates currently being paid for the same space.
We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2024 expirations will be above the rates currently being paid for the same space.
As of December 31, 2022, the buildings and improved land parcels were approximately 98.6% and 92.5% leased, respectively, to 569 customers, the largest of which accounted for approximately 4.3% of our total annualized base rent. The properties are located in Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.
As of December 31, 2023, the buildings and improved land parcels were approximately 98.5% and 94.6% leased, respectively, to 580 customers, the largest of which accounted for approximately 3.6% of our total annualized base rent. The properties are located in Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.
In addition, approximately 93.5% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years.
In addition, approximately 95.7% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years.
Cash rent changes on new and renewed leases totaling approximately 0.3 million square feet and 2.6 acres of improved land commencing during the three months ended December 31, 2022 were approximately 45.2% higher as compared to the previous rental rates for that same space, and cash rent changes on new and renewed leases totaling approximately 2.2 million square feet and 19.1 acres of improved land commencing during the year ended December 31, 2022 were approximately 49.5% higher as compared to the previous rental rates for that same space.
Cash rent changes on new and renewed leases totaling approximately 0.3 million square feet and zero acres of improved land commencing during the three months ended December 31, 2023 were approximately 47.5% higher as compared to the previous rental rates for that same space, and cash rent changes on new and renewed leases totaling approximately 2.1 million square feet and 11.4 acres of improved land commencing during the year ended December 31, 2023 were approximately 55.5% higher as compared to the previous rental rates for that same space.
We had a tenant retention ratio for the operating portfolio of 80.6% and 56.6%, respectively, for the three months and year ended December 31, 2022. We had a tenant retention ratio for the improved land portfolio of 0% and 65.0%, respectively, for the three months and year ended December 31, 2022.
We had a tenant retention ratio for the operating portfolio of 75.6% and 57.7%, respectively, for the three months and year ended December 31, 2023. We had a tenant retention ratio for the improved land portfolio of 0% and 16.8%, respectively, for the three months and year ended December 31, 2023.
The following table summarizes by type our investments in real estate as of December 31, 2022: Type Number of Buildings or Improved Land Parcels Annualized Base Rent (in thousands) 1 % of Total Warehouse/distribution 220 $ 166,531 76.5 % Flex 13 8,919 4.1 % Transshipment 19 14,764 6.8 % Improved land 46 27,352 12.6 % Total 298 $ 217,566 100.0 % 1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2022, multiplied by 12. 24 Table of Contents The following table summarizes by market our investments in real estate as of December 31, 2022: Los Angeles Northern New Jersey/New York City San Francisco Bay Area Seattle Miami Washington, D.C.
The following table summarizes by type our investments in real estate as of December 31, 2023: Type Number of Buildings or Improved Land Parcels Annualized Base Rent (in thousands) 1 % of Total Warehouse/distribution 225 $ 194,430 76.8 % Flex 14 9,381 3.7 % Transshipment 20 18,097 7.1 % Improved land 45 31,441 12.4 % Total 304 $ 253,349 100.0 % 1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2023, multiplied by 12. 24 Table of Contents The following table summarizes by market our investments in real estate as of December 31, 2023: Los Angeles Northern New Jersey/New York City San Francisco Bay Area Seattle Miami Washington, D.C.
As of December 31, 2022, leases representing approximately 9.2% of the total annualized base rent of our portfolio are scheduled to expire during the year ending December 31, 2023.
Our ability to re-lease or renew expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations. As of December 31, 2023, leases representing approximately 10.2% of the total annualized base rent of our portfolio are scheduled to expire during the year ending December 31, 2024.
As of December 31, 2022, we owned three properties under redevelopment that, upon completion, will consist of one building of approximately 34,000 square feet and two improved land parcels aggregating approximately 12.1 acres with a total expected investment of approximately $69.3 million, including redevelopment costs, capitalized interest and other costs. 25 Table of Contents The following table summarizes our capital expenditures incurred during the three months and years ended December 31, 2022 and 2021 (dollars in thousands): For the Three Months Ended December 31, For the Year Ended December 31, 2022 2021 2022 2021 Building improvements $ 6,165 $ 8,600 $ 40,337 $ 29,614 Tenant improvements 252 1,060 11,533 8,018 Leasing commissions 4,410 3,265 19,584 15,487 Redevelopment, renovation and expansion 678 4,776 21,623 14,711 Total capital expenditures 1 $ 11,505 $ 17,701 $ 93,077 $ 67,830 1 Includes approximately $6.2 million and $11.0 million for the three months ended December 31, 2022 and 2021, respectively, and approximately $61.1 million and $39.0 million for the years ended December 31, 2022 and 2021, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 20 and 22 properties for the three months ended December 31, 2022 and 2021, respectively, and at 34 and 24 properties for the years ended December 31, 2022 and 2021, respectively.
The following table summarizes our capital expenditures incurred during the three months and years ended December 31, 2023 and 2022 (dollars in thousands): For the Three Months Ended December 31, For the Year Ended December 31, 2023 2022 2023 2022 Building improvements $ 7,440 $ 6,165 $ 27,516 $ 40,337 Tenant improvements 1,386 252 5,959 11,533 Leasing commissions 2,454 4,410 11,821 19,584 Development, redevelopment, renovation and expansion 51,098 678 139,974 21,623 Total capital expenditures 1 $ 62,378 $ 11,505 $ 185,270 $ 93,077 1 Includes approximately $54.7 million and $6.2 million for the three months ended December 31, 2023 and 2022, respectively, and approximately $157.4 million and $61.1 million for the years ended December 31, 2023 and 2022, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 23 and 20 properties for the three months ended December 31, 2023 and 2022, respectively, and at 30 and 34 properties for the years ended December 31, 2023 and 2022, respectively.
The following table summarizes the anticipated lease expirations for leases in place as of December 31, 2022, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations: Year Rentable Square Feet % of Total Rentable Square Feet Annualized Base Rent (in thousands) 2, 3 % of Total Annualized Base Rent 2023 1 2,010,833 13.2 % $ 23,027 9.2 % 2024 1,811,128 11.9 % 25,385 10.2 % 2025 2,221,818 14.5 % 38,014 15.2 % 2026 2,435,001 15.9 % 42,928 17.2 % 2027 2,382,505 15.6 % 39,447 15.8 % Thereafter 4,205,751 27.5 % 80,871 32.4 % Total 15,067,036 98.6 % $ 249,672 100.0 % 1 Includes leases that expire on or after December 31, 2022 and month-to-month leases totaling approximately 84,922 square feet. 2 Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of December 31, 2022, multiplied by 12. 3 Includes annualized base rent related to 46 improved land parcels totaling approximately 161.4 acres. 27 Table of Contents Our ability to re-lease or renew expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations.
The following tables summarize the anticipated lease expirations for leases in place as of December 31, 2023, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations: Buildings: Year Rentable Square Feet % of Total Rentable Square Feet Annualized Base Rent (in thousands) 2 % of Total Annualized Base Rent 3 2024 1 1,927,639 12.0 % $ 24,104 8.4 % 2025 2,204,921 13.7 % 34,196 12.0 % 2026 3,054,968 19.0 % 46,692 16.4 % 2027 2,463,641 15.4 % 40,968 14.4 % 2028 1,963,572 12.2 % 38,688 13.6 % Thereafter 4,190,133 26.2 % 63,938 22.3 % Total 15,804,874 98.5 % $ 248,586 87.1 % 27 Table of Contents Improved Land Parcels: Year Improved Land Acreage % of Total Improved Land Acreage Annualized Base Rent (in thousands) 2 % of Total Annualized Base Rent 3 2024 4 24.5 16.1 % $ 5,191 1.8 % 2025 14.9 9.8 % 3,626 1.3 % 2026 17.9 11.7 % 4,882 1.7 % 2027 12.2 8.0 % 4,156 1.5 % 2028 14.8 9.6 % 3,945 1.4 % Thereafter 60.1 39.4 % 14,980 5.2 % Total 144.4 94.6 % $ 36,780 12.9 % Total Buildings and Improved Land Parcels: Year Total Annualized Base Rent (in thousands) 3 % of Total Annualized Base Rent 3 2024 5 $ 29,295 10.2 % 2025 37,822 13.3 % 2026 51,574 18.1 % 2027 45,124 15.9 % 2028 42,633 15.0 % Thereafter 78,918 27.5 % Total $ 285,366 100.0 % 1 Includes leases that expire on or after December 31, 2023 and month-to-month leases totaling approximately 164,073 square feet. 2 Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of December 31, 2023, multiplied by 12. 3 Total annualized base rent is calculated as contractual monthly base rent per the leases at expiration, for all buildings and/or improved land parcels, excluding any partial or full rent abatements, as of December 31, 2023, multiplied by 12. 4 Includes leases that expire on or after December 31, 2023 and month-to-month leases totaling approximately 2.4 acres. 5 Includes leases that expire on or after December 31, 2023 and month-to-month leases disclosed in footnotes 1 and 4 of the table.
Item 2. Properties. As of December 31, 2022, we owned a total of 252 buildings aggregating approximately 15.3 million square feet, 46 improved land parcels consisting of approximately 161.4 acres and three properties under redevelopment that, upon completion, will consist of one building of approximately 34,000 square feet and two improved land parcels aggregating approximately 12.1 acres.
Item 2. Properties. As of December 31, 2023, we owned a total of 259 buildings aggregating approximately 16.0 million square feet, 45 improved land parcels consisting of approximately 152.4 acres, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development.
Total/Weighted Average Investments in Real Estate Number of Buildings 54 43 52 44 37 22 252 Rentable Square Feet 2,779,708 2,706,893 2,436,280 2,783,070 2,814,302 1,762,100 15,282,353 % of Total 18.2 % 17.7 % 15.9 % 18.2 % 18.5 % 11.5 % 100.0 % Occupancy % as of December 31, 2022 99.3 % 98.7 % 97.0 % 97.3 % 100.0 % 99.2 % 98.6 % Annualized Base Rent (in thousands) 1 $ 33,419 $ 42,651 $ 34,080 $ 32,539 $ 26,476 $ 21,049 $ 190,214 % of Total 17.6 % 22.4 % 17.9 % 17.1 % 13.9 % 11.1 % 100.0 % Annualized Base Rent 1 Per Occupied Square Foot $ 12.10 $ 15.96 $ 14.42 $ 12.01 $ 9.41 $ 12.05 $ 12.62 Weighted Average Remaining Lease Term (Years) 2 5.7 4.5 2.8 3.9 5.2 3.4 4.3 Investments in Improved Land Number of Land Parcels 14 13 3 10 3 3 46 Acres 29.8 68.0 7.1 25.9 9.9 20.7 161.4 % of Total 18.5 % 42.2 % 4.4 % 16.0 % 6.1 % 12.8 % 100.0 % Occupancy % as of December 31, 2022 89.4 % 100.0 % 100.0 % 92.4 % 32.0 % 100.0 % 92.5 % Annualized Base Rent (in thousands) 1 $ 8,199 $ 11,423 $ 1,467 $ 3,882 $ 428 $ 1,953 $ 27,352 % of Total 30.0 % 41.8 % 5.4 % 14.2 % 1.6 % 7.0 % 100.0 % Annualized Base Rent 1 Per Occupied Square Foot $ 7.07 $ 4.03 $ 4.76 $ 3.89 $ 3.11 $ 2.24 $ 4.31 Weighted Average Remaining Lease Term (Years) 2 3.8 5.0 3.1 2.4 1.8 6.3 4.4 Total Investments in Real Estate and Improved Land Annualized Base Rent (in thousands) 1 $ 41,618 $ 54,074 $ 35,547 $ 36,421 $ 26,904 $ 23,002 $ 217,566 % of Total Annualized Base Rent 1 19.1 % 24.9 % 16.3 % 16.7 % 12.4 % 10.6 % 100.0 % Gross Book Value (in thousands) 3 $ 679,911 $ 769,004 $ 556,761 $ 601,920 $ 467,136 $ 324,042 $ 3,398,774 % of Total Gross Book Value 20.0 % 22.6 % 16.4 % 17.7 % 13.7 % 9.6 % 100.0 % 1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2022, multiplied by 12. 2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of December 31, 2022, weighted by the respective square footage. 3 Includes three properties under redevelopment that, upon completion, will consist of one building of approximately 34,000 square feet and two improved land parcels aggregating approximately 12.1 acres.
Total/Weighted Average Investments in Real Estate Number of Buildings 55 43 56 44 38 23 259 Rentable Square Feet 2,834,338 2,612,120 3,040,325 2,753,247 3,006,585 1,795,019 16,041,634 % of Total 17.6 % 16.3 % 19.0 % 17.2 % 18.7 % 11.2 % 100.0 % Occupancy % as of December 31, 2023 4 98.9 % 99.7 % 96.2 % 97.5 % 100.0 % 99.3 % 98.5 % Annualized Base Rent (in thousands) 1 $ 37,986 $ 50,595 $ 44,966 $ 33,800 $ 31,549 $ 23,012 $ 221,908 % of Total 17.1 % 22.8 % 20.3 % 15.2 % 14.2 % 10.4 % 100.0 % Annualized Base Rent 1 Per Occupied Square Foot $ 13.55 $ 19.42 $ 15.38 $ 12.60 $ 10.49 $ 12.90 $ 14.04 Weighted Average Remaining Lease Term (Years) 2 5.2 4.2 3.5 3.3 4.9 3.0 4.1 Investments in Improved Land Number of Land Parcels 13 13 4 10 3 2 45 Acres 27.0 68.0 14.3 25.9 9.9 7.3 152.4 % of Total 17.7 % 44.6 % 9.4 % 17.0 % 6.5 % 4.8 % 100.0 % Occupancy % as of December 31, 2023 88.9 % 92.4 % 100.0 % 100.0 % 100.0 % 100.0 % 94.6 % Annualized Base Rent (in thousands) 1 $ 7,766 $ 11,850 $ 2,799 $ 6,053 $ 1,898 $ 1,075 $ 31,441 % of Total 24.7 % 37.7 % 8.9 % 19.3 % 6.0 % 3.4 % 100.0 % Annualized Base Rent 1 Per Occupied Square Foot $ 7.44 $ 4.52 $ 4.80 $ 5.60 $ 4.41 $ 3.69 $ 5.18 Weighted Average Remaining Lease Term (Years) 2 3.7 4.6 5.7 3.1 7.3 3.8 4.4 Total Investments in Real Estate and Improved Land Annualized Base Rent (in thousands) 1 $ 45,752 $ 62,445 $ 47,765 $ 39,853 $ 33,447 $ 24,087 $ 253,349 % of Total Annualized Base Rent 1 18.1 % 24.6 % 18.9 % 15.7 % 13.2 % 9.5 % 100.0 % Gross Book Value (in thousands) 3 $ 746,337 $ 813,382 $ 765,544 $ 608,519 $ 783,082 $ 330,976 $ 4,047,840 % of Total Gross Book Value 18.4 % 20.1 % 18.9 % 15.0 % 19.3 % 8.3 % 100.0 % 1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2023, multiplied by 12. 2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of December 31, 2023, weighted by the respective square footage. 3 Includes seven properties under development or redevelopment that, upon completion, will consist of six buildings aggregating approximately 1.0 million square feet and one approximately 2.8-acre improved land parcel, and approximately 62.7 acres of land entitled for future development. 4 Occupancy increased during the three months ended December 31, 2023 due, in part, to approximately 29,000 square feet of vacant space at our 1st Avenue property in Seattle being removed from the operating portfolio and repurposed as additional parking.
Removed
DBA A&V Transportation 2 — — % 1,805 0.8 % 4.4 15 L3 Harris Technologies, Inc. 1 147,898 1.0 % 1,751 0.8 % — 16 Divergent Technologies, Inc. 2 72,808 0.5 % 1,613 0.8 % 1.4 17 Bar Logistics 1 203,263 1.3 % 1,593 0.7 % — 18 Topaz Lighting Corp. 1 190,000 1.2 % 1,552 0.7 % — 19 YRC 2 61,252 0.4 % 1,540 0.7 % — 20 PODS Enterprises, LLC 1 201,977 1.3 % 1,515 0.7 % — Total 51 3,328,433 21.8 % $ 54,900 25.2 % 43.8 1 Annualized base rent is calculated as contractual monthly base rent per the leases for rentable square feet and/or, if applicable, improved land, excluding any partial or full rent abatements, as of December 31, 2022, multiplied by 12.
Added
As of December 31, 2023, we owned seven properties under development or redevelopment that, upon completion, will consist of six buildings aggregating approximately 1.0 million square feet and one approximately 2.8-acre improved land parcel, and approximately 62.7 acres of land entitled for future development, with a total expected investment of approximately 25 Table of Contents $592.0 million, including redevelopment costs, capitalized interest and other costs.
Added
Any ultimate recovery of past due rent is undetermined at this time. In January 2024, we commenced redevelopment of and executed a short-term lease for the existing property with an e-commerce firm that will expire in January 2026.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
4 edited+0 added−2 removed9 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
4 edited+0 added−2 removed9 unchanged
2022 filing
2023 filing
Biggest change(c) Period (a) Total Number of Shares of Common Stock Purchased (b) Average Price Paid per Common Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plan or Program October 1, 2022 - October 31, 2022 108 $ 55.98 N/A N/A November 1, 2022 - November 30, 2022 — — N/A N/A December 1, 2022 - December 31, 2022 — — N/A N/A Total 108 1 $ 55.98 N/A N/A 1 Represents shares of common stock surrendered by employees to the Company to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted stock.
Biggest changeIssuer Purchases of Equity Securities (a) Total Number of Shares of Common Stock Purchased (b) Average Price Paid per Common Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plan or Program October 1, 2023 - October 31, 2023 — $ — N/A N/A November 1, 2023 - November 30, 2023 144 54.47 N/A N/A December 1, 2023 - December 31, 2023 — — N/A N/A Total 144 1 $ 54.47 N/A N/A (1) Represents shares of common stock surrendered by employees to the Company to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted stock.
The comparison assumes that $100 was invested on December 31, 2017 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. 29 Table of Contents The performance graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that the company specifically incorporates it by reference into such filing.
The comparison assumes that $100 was invested on December 31, 2018 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. 30 Table of Contents The performance graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that the company specifically incorporates it by reference into such filing.
Performance Graph The following graph compares the change in the cumulative total stockholder return on our common stock during the period from December 31, 2017 to December 31, 2022 with the cumulative total return of the Standard and Poor’s 500 Stock Index, the MSCI U.S. REIT Index (RMS) and the FTSE Nareit Equity Industrial Index.
Performance Graph The following graph compares the change in the cumulative total stockholder return on our common stock during the period from December 31, 2018 to December 31, 2023 with the cumulative total return of the Standard and Poor’s 500 Stock Index, the MSCI U.S. REIT Index and the FTSE Nareit Equity Industrial Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “TRNO”. As of February 2, 2023, there were approximately 66,265 holders of record of shares of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “TRNO”. As of February 1, 2024, there were approximately 69,112 holders of record of shares of our common stock.
Removed
Recent Sales of Unregistered Securities (a) Not Applicable. (b) Not Applicable.
Removed
Issuer Purchases of Equity Securities None. 30 Table of Contents
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
94 edited+18 added−39 removed87 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
94 edited+18 added−39 removed87 unchanged
2022 filing
2023 filing
Biggest changeBy presenting same store NOI and cash-basis same store NOI, the operating results on a same store basis are directly comparable from period to period. 50 Table of Contents The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three months and years ended December 31, 2022, 2021 and 2020: For the Three Months Ended December 31, For the Three Months Ended December 31, 2022 2021 $ Change % Change 2021 2020 $ Change % Change Net income 1 $ 58,880 $ 32,259 $ 26,621 82.5 % $ 32,259 $ 13,513 $ 18,746 138.7 % Depreciation and amortization 18,536 13,707 4,829 35.2 % 13,707 11,192 2,515 22.5 % General and administrative 8,193 7,716 477 6.2 % 7,716 6,936 780 11.2 % Acquisition costs and other 374 — 374 n/a — 85 (85) n/a Total other income and expenses (29,059) (8,372) (20,687) 247.1 % (8,372) 4,127 (12,499) n/a Net operating income 56,924 45,310 11,614 25.6 % 45,310 35,853 9,457 26.4 % Less non-same store NOI (15,927) 2 (6,797) 2 (9,130) 134.3 % (7,094) 3 (1,859) 3 (5,235) 281.6 % Same store NOI 4 $ 40,997 $ 38,513 $ 2,484 6.4 % $ 38,216 $ 33,994 $ 4,222 12.4 % Less straight-line rents and amortization of lease intangibles 5 (1,381) (2,652) 1,271 (47.9) % (2,388) (2,117) (271) 12.8 % Cash-basis same store NOI $ 39,616 $ 35,861 $ 3,755 10.5 % $ 35,828 $ 31,877 $ 3,951 12.4 % Less termination fee income (77) (148) 71 (48.0) % (148) (75) (73) 97.3 % Cash-basis same store NOI excluding termination fees $ 39,539 $ 35,713 $ 3,826 10.7 % $ 35,680 $ 31,802 $ 3,878 12.2 % 1 Includes approximately $0.6 million, $0.1 million and $0.1 million of lease termination income for the three months ended December 31, 2022, 2021 and 2020, respectively. 2 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels, three properties under redevelopment and four completed redevelopment properties as of December 31, 2022. 3 Includes 2020 and 2021 acquisitions and dispositions, 17 improved land parcels, four properties under redevelopment and one completed redevelopment property as of December 31, 2022. 4 Includes approximately $0.1 million of lease termination income for the three months ended December 31, 2022, 2021 and 2020. 5 Includes straight-line rents and amortization of lease intangibles for the same store pool only. 51 Table of Contents For the Year Ended December 31, For the Year Ended December 31, 2022 2021 $ Change % Change 2021 2020 $ Change % Change Net income 1 $ 198,014 $ 87,254 $ 110,760 126.9 % $ 87,254 $ 79,795 $ 7,459 9.3 % Depreciation and amortization 65,763 50,687 15,076 29.7 % 50,687 45,875 4,812 10.5 % General and administrative 31,192 26,964 4,228 15.7 % 26,964 23,489 3,475 14.8 % Acquisition costs 1,465 172 1,293 751.7 % 172 271 (99) (36.5) % Total other income and expenses (89,125) 605 (89,730) n/a 605 (11,642) 12,247 n/a Net operating income 207,309 165,682 41,627 25.1 % 165,682 137,788 27,894 20.2 % Less non-same store NOI (48,152) 2 (17,479) 2 (30,673) 175.5 % (19,556) 3 (7,204) 3 (12,352) 171.5 % Same store NOI 4 $ 159,157 $ 148,203 $ 10,954 7.4 % $ 146,126 $ 130,584 $ 15,542 11.9 % Less straight-line rents and amortization of lease intangibles 5 (7,402) (11,006) 3,604 (32.7) % (10,021) (4,284) (5,737) 133.9 % Cash-basis same store NOI $ 151,755 $ 137,197 $ 14,558 10.6 % $ 136,105 $ 126,300 $ 9,805 7.8 % Less termination fee income (422) (764) 342 (44.8) % (309) (3,717) 3,408 (91.7) % Cash-basis same store NOI excluding termination fees $ 151,333 $ 136,433 $ 14,900 10.9 % $ 135,796 $ 122,583 $ 13,213 10.8 % 1 Includes approximately $0.9 million, $1.0 million and $3.8 million of lease termination income for the years ended December 31, 2022, 2021 and 2020, respectively. 2 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels consisting of approximately 69.9 acres, three properties under redevelopment and four completed redevelopment properties as of December 31, 2022. 3 Includes 2020 and 2021 acquisitions and dispositions, 17 improved land parcels consisting of approximately 47.5 acres, four properties under redevelopment and one completed redevelopment property as of December 31, 2022. 4 Includes approximately $0.4 million, $0.8 million and $3.7 million of lease termination income for the years ended December 31, 2022, 2021 and 2020, respectively. 5 Includes straight-line rents and amortization of lease intangibles for the same store pool only.
Biggest changeBy presenting same store NOI and cash-basis same store NOI, the operating results on a same store basis are directly comparable from period to period. 49 Table of Contents The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three months and years ended December 31, 2023, 2022 and 2021 (dollars in thousands): For the Three Months Ended December 31, For the Three Months Ended December 31, 2023 2022 $ Change % Change 2022 2021 $ Change % Change Net income 1 $ 57,557 $ 58,880 $ (1,323) (2.2) % $ 58,880 $ 32,259 $ 26,621 82.5 % Depreciation and amortization 18,583 18,536 47 0.3 % 18,536 13,707 4,829 35.2 % General and administrative 9,730 8,193 1,537 18.8 % 8,193 7,716 477 6.2 % Acquisition costs and other 92 374 (282) (75.4) % 374 — 374 n/a Total other income and expenses (21,127) (29,059) 7,932 (27.3) % (29,059) (8,372) (20,687) 247.1 Net operating income 64,835 56,924 7,911 13.9 % 56,924 45,310 11,614 25.6 % Less non-same store NOI (12,675) 2 (7,807) 2 (4,868) 62.4 % (15,927) 3 (6,797) 3 (9,130) 134.3 % Same store NOI $ 52,160 4 $ 49,117 4 $ 3,043 6.2 % $ 40,997 5 $ 38,513 5 $ 2,484 6.4 % Less straight-line rents and amortization of lease intangibles 6 (2,021) (4,254) 2,233 (52.5) % (1,381) (2,652) 1,271 (47.9) % Cash-basis same store NOI $ 50,139 $ 44,863 $ 5,276 11.8 % $ 39,616 $ 35,861 $ 3,755 10.5 % Less termination fee income (155) (551) 396 (71.9) % (77) (148) 71 (48.0) % Cash-basis same store NOI excluding termination fees $ 49,984 $ 44,312 $ 5,672 12.8 % $ 39,539 $ 35,713 $ 3,826 10.7 % 1 Includes approximately $0.2 million, $0.6 million and $0.1 million of lease termination income for the three months ended December 31, 2023, 2022 and 2021, respectively. 2 Includes 2022 and 2023 acquisitions and dispositions, nine improved land parcels, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development. 3 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels and three properties under development or redevelopment. 4 Includes $0.2 million and $0.6 million of lease termination income for the three months ended December 31, 2023 and 2022, respectively. 5 Includes $0.1 million of lease termination income for both the three months ended December 31, 2022 and 2021. 6 Includes straight-line rents and amortization of lease intangibles for the same store pool only. 50 Table of Contents For the Year Ended December 31, For the Year Ended December 31, 2023 2022 $ Change % Change 2022 2021 $ Change % Change Net income 1 $ 151,457 $ 198,014 $ (46,557) (23.5) % $ 198,014 $ 87,254 $ 110,760 126.9 % Depreciation and amortization 73,219 65,763 7,456 11.3 % 65,763 50,687 15,076 29.7 % General and administrative 37,935 31,192 6,743 21.6 % 31,192 26,964 4,228 15.7 % Acquisition costs and other 218 1,465 (1,247) (85.1) % 1,465 172 1,293 751.7 % Total other income and expenses (18,324) (89,125) 70,801 (79.4) % (89,125) 605 (89,730) n/a Net operating income 244,505 207,309 37,196 17.9 % 207,309 165,682 41,627 25.1 % Less non-same store NOI (43,578) 2 (22,209) 2 (21,369) 96.2 % (48,152) 3 (17,479) 3 (30,673) 175.5 % Same store NOI 4 $ 200,927 4 $ 185,100 4 $ 15,827 8.6 % $ 159,157 5 $ 148,203 5 $ 10,954 7.4 % Less straight-line rents and amortization of lease intangibles 6 (10,009) (16,564) 6,555 (39.6) % (7,402) (11,006) 3,604 (32.7) % Cash-basis same store NOI $ 190,918 $ 168,536 $ 22,382 13.3 % $ 151,755 $ 137,197 $ 14,558 10.6 % Less termination fee income (293) (896) 603 (67.3) % (422) (764) 342 (44.8) % Cash-basis same store NOI excluding termination fees $ 190,625 $ 167,640 $ 22,985 13.7 % $ 151,333 $ 136,433 $ 14,900 10.9 % 1 Includes approximately $0.6 million, $0.9 million and $1.0 million of lease termination income for the years ended December 31, 2023, 2022 and 2021, respectively. 2 Includes 2022 and 2023 acquisitions and dispositions, nine improved land parcels, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development. 3 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels and three properties under development or redevelopment. 4 Includes approximately $0.3 million and $0.9 million of lease termination income for the years ended December 31, 2023 and 2022, respectively. 5 Includes approximately $0.4 million and $0.8 million of lease termination income for the years ended December 31, 2022 and 2021, respectively. 6 Includes straight-line rents and amortization of lease intangibles for the same store pool only.
We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles.
We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles.
We selected our target markets by drawing upon the experience of our executive management investing and operating in over 50 global industrial markets located in North America, Europe and Asia, the fundamentals of supply and demand, and in anticipation of trends in logistics patterns resulting from population changes, regulatory and physical constraints, changes in technology, e-commerce, the economic and environmental benefits of reducing vehicle miles traveled and other factors.
We selected our target markets by drawing upon the experience of our executive management investing and operating in over 50 global industrial markets located in North America, Europe and Asia, the fundamentals of supply and demand, and in anticipation of trends in logistics patterns resulting from population changes, regulatory, geopolitical and physical constraints, changes in technology, e-commerce, the economic and environmental benefits of reducing vehicle miles traveled and other factors.
We expect to meet our long-term liquidity requirements, including with respect to other investments in industrial properties, property acquisitions, property redevelopments, renovations and expansions and scheduled debt maturities, through borrowings under our revolving credit facility, periodic issuances of common stock, perpetual preferred stock, and long-term unsecured and secured debt, and, from time to time, with proceeds from the disposition of properties.
We expect to meet our long-term liquidity requirements, including with respect to other investments in industrial properties, property acquisitions, property developments and redevelopments, renovations and expansions and scheduled debt maturities, through borrowings under our revolving credit facility, periodic issuances of common stock, perpetual preferred stock, and long-term unsecured and secured debt, and, from time to time, with proceeds from the disposition of properties.
We capitalize costs directly related to the redevelopment, renovation and expansion of our investment in real estate. Costs associated with such projects are capitalized as incurred. If the project is abandoned, these costs are expensed during the period in which the redevelopment or expansion project is abandoned.
We capitalize costs directly related to the development, redevelopment, renovation and expansion of our investment in real estate. Costs associated with such projects are capitalized as incurred. If the project is abandoned, these costs are expensed during the period in which the development, redevelopment or expansion project is abandoned.
Interest is capitalized based on actual capital expenditures from the period when redevelopment, renovation or expansion commences until the asset is ready for its intended use, at the weighted average borrowing rate during the period. Property Acquisitions.
Interest is capitalized based on actual capital expenditures from the period when development, redevelopment, renovation or expansion commences until the asset is ready for its intended use, at the weighted average borrowing rate during the period. Property Acquisitions.
We believe that on average, the rental rates we are likely to achieve on new or renewed leases for our 2023 expirations will be above the rates currently paid for the same space. However, new speculative development continues. This new development will slow potential rent growth from what it would be without such new development. We see attractive acquisition opportunities.
We believe that on average, the rental rates we are likely to achieve on new or renewed leases for our 2024 expirations will be above the rates currently paid for the same space. However, new speculative development continues. This new development will slow potential rent growth from what it would be without such new development. We see attractive acquisition opportunities.
The applicable SOFR margin will range from 1.10% to 1.55% (1.10% as of December 31, 2022) for the revolving credit facility and 1.25% to 1.75% (1.25% as of December 31, 2022) for the term loans, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value and includes a 10 basis points SOFR credit adjustment.
The applicable SOFR margin will range from 1.10% to 1.55% (1.10% as of December 31, 2023) for the revolving credit facility and 1.25% to 1.75% (1.25% as of December 31, 2023) for the term loans, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value and includes a 10 basis points SOFR credit adjustment.
Costs considered for capitalization include, but are not limited to, construction costs, interest, real estate taxes and insurance, if appropriate. These 44 Table of Contents costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress.
Costs considered for capitalization include, but are not limited to, construction costs, interest, real estate taxes and insurance, if appropriate. These costs are capitalized only during the period in which activities necessary to ready an asset for its 43 Table of Contents intended use are in progress.
See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a definition and reconciliation of net operating income and same store net operating income from net income and a discussion of why we believe net operating income and same store net operating income are useful supplemental measures of our operating performance. 39 Table of Contents Revenues.
See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a definition and reconciliation of net operating income and same store net operating income from net income and a discussion of why we believe net operating income and same store net operating income are useful supplemental measures of our operating performance. 38 Table of Contents Revenues.
This increase in cash provided by operating activities is primarily attributable to additional cash flows generated from the properties acquired during 2022 and 2021 and increased rents on new and renewed leases at our same store properties. Cash From Investing Activities.
This increase in cash provided by operating activities is primarily attributable to additional cash flows generated from the properties acquired during 2023 and 2022 and increased rents on new and renewed leases at our same store properties. Cash From Investing Activities.
The Amended Facility and the Senior Unsecured Notes include a series of financial and other covenants with which we must comply. We were in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of December 31, 2022 and 2021.
The Amended Facility and the Senior Unsecured Notes include a series of financial and other covenants with which we must comply. We were in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of December 31, 2023 and 2022.
The same store pool for the comparison of the three months and years ended December 31, 2021 and 2020 includes all properties that were owned and in operation as of December 31, 2021 and since January 1, 2020 and excludes properties that were either disposed of prior to, held for sale to a third-party or in redevelopment as of December 31, 2021.
The same store pool for the comparison of the three months and years ended December 31, 2022 and 2021 includes all properties that were owned and in operation as of December 31, 2022 and since January 1, 2021 and excludes properties that were either disposed of prior to, held for sale to a third-party or in development or redevelopment as of December 31, 2022.
The same store pool for the comparison of the years ended December 31, 2022 and 2021 includes all properties that were owned and in operation as of December 31, 2022 and since January 1, 2021 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of December 31, 2022.
The same store pool for the comparison of the years ended December 31, 2023 and 2022 includes all properties that were owned and in operation as of December 31, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of December 31, 2023.
We intend to use the net proceeds from the offering of the shares under the $300 Million ATM Program, if any, for general corporate purposes, which may include future acquisitions, redevelopments and repayment of indebtedness, including borrowings under our revolving credit facility.
We intend to use the net proceeds from the offering of the shares under the $500 Million ATM Program, if any, for general corporate purposes, which may include future acquisitions, developments and redevelopments and repayment of indebtedness, including borrowings under our revolving credit facility.
Interest on the Amended Facility, including the term loans, is generally to be paid based upon, at our option, either (i) SOFR plus the applicable SOFR margin or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, 0.50% above the federal funds effective rate, thirty-day SOFR plus the applicable SOFR margin for SOFR rate loans under the Amended Facility plus 1.25%, or 1.25% per annum.
Interest on the Amended Facility, including the term loans, is generally to be paid based upon, at our option, either (i) the Secured Overnight Financing Rate (“SOFR”) plus the applicable SOFR margin or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, 0.50% above the federal funds effective rate, thirty-day SOFR plus the applicable SOFR margin for SOFR rate loans under the Amended Facility plus 1.25%, or 1.25% per annum.
See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance. 9 Total debt-to-Adjusted EBITDA is calculated as total debt, including premiums and net of deferred financing costs, divided by annualized Adjusted EBITDA.
See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance. 9 Net debt-to-Adjusted EBITDA is calculated as total debt, net of deferred financing costs and cash and cash equivalents, divided by annualized Adjusted EBITDA.
The same store pool includes all properties that were owned and in operation as of December 31, 2022 and since January 1, 2021 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of December 31, 2022.
The same store pool includes all properties that were owned and in operation as of December 31, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of December 31, 2023.
The analysis of our results below for the years ended December 31, 2022 and 2021 includes the changes attributable to same store properties.
The analysis of our results below for the years ended December 31, 2023 and 2022 includes the changes attributable to same store properties.
Acquisition costs and other also increased for the year ended December 31, 2022 due to environmental remediation at our Avenue A property. Additionally, for the three months ended December 31, 2022, we wrote off $2.0 million in below market leases related to early lease terminations at multiple properties.
During the three months ended December 31, 2022, we wrote off $2.0 million in below market leases related to early lease terminations at multiple properties and during the year ended December 31, 2022, acquisition costs and other increased due to environmental remediation at our Avenue A property.
As of December 31, 2022, we had not repurchased any shares of our common stock pursuant to our share repurchase program.
As of December 31, 2023, we had not repurchased any shares of our common stock pursuant to our share repurchase program.
We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), which defines FFO as net income (loss) (determined in accordance with GAAP), excluding gains (losses) from sales of property and impairment write-downs of depreciable real estate, plus depreciation and amortization on real estate assets and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis).
We compute FFO in accordance with standards established by Nareit, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding gains (losses) from sales of property and impairment write-downs of depreciable real estate, plus depreciation and amortization on real estate assets and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis).
See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance. 43 Table of Contents The following table sets forth the cash dividends paid or payable per share during the years ended December 31, 2022 and 2021: For the Three Months Ended Security Dividend per Share Declaration Date Record Date Date Paid March 31, 2022 Common stock $ 0.34 February 8, 2022 March 25, 2022 April 8, 2022 June 30, 2022 Common stock $ 0.34 May 3, 2022 June 30, 2022 July 14, 2022 September 30, 2022 Common stock $ 0.40 August 2, 2022 September 30, 2022 October 14, 2022 December 31, 2022 Common stock $ 0.40 November 1, 2022 December 30, 2022 January 13, 2023 For the Three Months Ended Security Dividend per Share Declaration Date Record Date Date Paid March 31, 2021 Common stock $ 0.29 February 9, 2021 March 26, 2021 April 9, 2021 June 30, 2021 Common stock $ 0.29 May 4, 2021 June 30, 2021 July 14, 2021 September 30, 2021 Common stock $ 0.34 August 3, 2021 October 1, 2021 October 15, 2021 December 31, 2021 Common stock $ 0.34 November 2, 2021 December 15, 2021 January 5, 2022 Sources and Uses of Cash Our principal sources of cash are cash from operations, borrowings under loans payable, draws on our Amended Facility, common and preferred stock issuances, proceeds from property dispositions and issuances of unsecured notes.
See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance. 42 Table of Contents The following tables set forth the cash dividends paid or payable per share during the years ended December 31, 2023 and 2022: For the Three Months Ended Security Dividend per Share Declaration Date Record Date Date Paid March 31, 2023 Common Stock $ 0.40 February 7, 2023 March 31, 2023 April 6, 2023 June 30, 2023 Common Stock $ 0.40 May 2, 2023 June 30, 2023 July 14, 2023 September 30, 2023 Common Stock $ 0.45 August 1, 2023 September 29, 2023 October 13, 2023 December 31, 2023 Common Stock $ 0.45 October 31, 2023 December 15, 2023 January 5, 2024 For the Three Months Ended Security Dividend per Share Declaration Date Record Date Date Paid March 31, 2022 Common Stock $ 0.34 February 8, 2022 March 25, 2022 April 8, 2022 June 30, 2022 Common Stock $ 0.34 May 3, 2022 June 30, 2022 July 14, 2022 September 30, 2022 Common Stock $ 0.40 August 2, 2022 September 30, 2022 October 14, 2022 December 31, 2022 Common Stock $ 0.40 November 1, 2022 December 30, 2022 January 13, 2023 Sources and Uses of Cash Our principal sources of cash are cash from operations, borrowings under loans payable, draws on our Amended Facility, common and preferred stock issuances, proceeds from property dispositions and issuances of unsecured notes.
Also includes 417,665 and 275,727 shares held in the Deferred Compensation Plan as of December 31, 2022 and 2021, respectively. 2 Closing price of a share of our common stock on the New York Stock Exchange on December 30, 2022 and 2021, respectively, in dollars per share. 3 Total debt-to-total investments in properties is calculated as total debt, including premiums and net of deferred financing costs, divided by total investments in properties. 4 Total debt-to-total market capitalization is calculated as total debt, including premiums and net of deferred financing costs, divided by total market capitalization. 5 Floating rate debt as a percentage of total debt is calculated as floating rate debt, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing costs. 6 Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the years ended December 31, 2022 and 2021, respectively.
Also includes 508,663 and 417,665 shares held in the Deferred Compensation Plan as of December 31, 2023 and 2022, respectively. 2 Closing price of a share of our common stock on the New York Stock Exchange on December 29, 2023 and December 30, 2022, respectively, in dollars per share. 3 Total debt-to-total investments in properties is calculated as total debt, net of deferred financing costs, divided by total investments in properties. 4 Total debt-to-total market capitalization is calculated as total debt, net of deferred financing costs, divided by total market capitalization. 5 Floating rate debt as a percentage of total debt is calculated as floating rate debt, net of deferred financing costs, divided by total debt, net of deferred financing costs. 6 Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the years ended December 31, 2023 and 2022, respectively.
Our principal uses of cash are asset acquisitions, debt service, capital expenditures, operating costs, corporate overhead costs and common stock dividends. Cash From Operating Activities. Net cash provided by operating activities totaled approximately $143.2 million for the year ended December 31, 2022 compared to approximately $132.2 million for the year ended December 31, 2021.
Our principal uses of cash are asset acquisitions, debt service, capital expenditures, operating costs, corporate overhead costs and common stock dividends. Cash From Operating Activities. Net cash provided by operating activities totaled approximately $179.7 million for the year ended December 31, 2023 compared to approximately $143.2 million for the year ended December 31, 2022.
For the years ended December 31, 2022 and 2021, approximately $7.5 million and $5.3 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.9 million and $1.0 million, respectively, was recorded in lease termination revenue. Property operating expenses.
For the years ended December 31, 2023 and 2022, approximately $7.7 million and $7.5 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.6 million and $0.9 million, respectively, was recorded in lease termination revenue. Property operating expenses.
We invest in several types of industrial real estate, including warehouse/distribution (approximately 76.5% of our total annualized base rent as of December 31, 2022), flex (including light industrial and research and development, or R&D) (approximately 4.1%), transshipment (approximately 6.8%) and improved land (approximately 12.6%).
We invest in several types of industrial real estate, including warehouse/distribution (approximately 76.8% of our total annualized base rent as of December 31, 2023), flex (including light industrial and research and development, or R&D) (approximately 3.7%), transshipment (approximately 7.1%) and improved land (approximately 12.4%).
Cash-basis same store NOI increased by approximately $3.8 million for the three months ended December 31, 2022 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases and contractual rent increases included in pre-existing leases.
Cash-basis same store NOI increased by approximately $5.3 million for the three months ended December 31, 2023 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases and contractual rent increases on pre-existing leases.
In the near-term, we intend to fund future investments in properties with cash on hand, term loans, senior unsecured notes, mortgages, borrowings under our revolving credit facility, perpetual preferred and common stock issuances and, from time to time, property dispositions.
In the near-term, we intend to fund future investments in properties, property developments and redevelopments and scheduled debt maturities with cash on hand, term loans, senior unsecured notes, borrowings under our revolving credit facility, perpetual preferred and common stock issuances and, from time to time, property dispositions.
For the three months ended December 31, 2022 and 2021, total contractual rent abatements of approximately $1.1 million and $0.7 million, respectively, were given to certain tenants in the same-store pool and approximately $0.1 million and $0.1 million, respectively, in lease termination income was received from certain tenants in the same store pool.
For the three months ended December 31, 2023 and 2022, total contractual rent abatements of approximately $0.3 million and $1.3 million, respectively, were given to certain tenants in the same store pool and approximately $0.2 million and $0.6 million, respectively, in lease termination income was received from certain tenants in the same store pool.
For the years ended December 31, 2022 and 2021, total contractual rent abatements of approximately $3.5 million and $3.0 million, respectively, were given to certain tenants in the same-store pool and approximately $0.4 million and $0.8 million, respectively, in lease termination income was received from certain tenants in the same store pool.
For the years ended December 31, 2023 and 2022, total contractual rent abatements of approximately $3.2 million and $4.3 million, respectively, were given to certain tenants in the same-store pool and approximately $0.3 million and $0.9 million, respectively, in lease termination income was received from certain tenants in the same store pool.
In addition, approximately $0.2 million of the increase in cash-basis same store NOI for the three months ended December 31, 2022 related to properties that were acquired vacant or with near term expirations in 2020.
In addition, approximately $0.3 million of the increase in cash-basis same store NOI for the three months ended December 31, 2023 related to properties that were acquired vacant or with near term expirations in 2021.
We entered 2023 with our balance sheet exceedingly well positioned for growth as we have no balance outstanding on our $400.0 million revolving credit facility and a cash balance of approximately $26.4 million. Within our six markets we have increasingly focused on urban infill locations.
We entered 2024 with our balance sheet exceedingly well positioned for growth as we have no balance outstanding on our $400.0 million revolving credit facility and a cash balance of approximately $165.4 million. 36 Table of Contents Within our six markets we have increasingly focused on urban infill locations.
General and administrative expenses increased approximately $4.2 million for the year ended December 31, 2022 compared to the prior year primarily due to increased restricted stock amortization and other compensation expenses, including an increase in bonus expense and an increase in the number of employees and salaries compared to the prior year. Acquisition costs and other.
General and administrative expenses increased approximately $6.7 million for the year ended December 31, 2023 compared to the prior year primarily due to increased compensation expenses including increased restricted stock amortization, LTIP expense and bonus expense, and an increase in the number of employees and salaries compared to the prior year. Acquisition costs and other.
Over the long-term, we intend to: • limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding perpetual preferred stock to less than 35% of our total enterprise value; • maintain a fixed charge coverage ratio in excess of 2.0x; • maintain a debt-to-adjusted EBITDA ratio below 6.0x; 40 Table of Contents • limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness; and • have staggered debt maturities that are aligned to our expected average lease term (five to seven years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions.
Over the long-term, we intend to: • limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding perpetual preferred stock to less than 35% of our total enterprise value; • maintain a fixed charge coverage ratio in excess of 2.0x; • maintain a net debt-to-adjusted EBITDA ratio below 5.0x; • limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness; and • have staggered debt maturities that are aligned to our expected average lease term (five to seven years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions. 39 Table of Contents We intend to preserve a flexible capital structure with a long-term goal to maintain our investment grade rating and be in a position to issue additional unsecured debt and perpetual preferred stock.
As of December 31, 2022 and December 31, 2021, there were no borrowings outstanding on the revolving credit facility and $200.0 million and $100.0 million, respectively, of borrowings outstanding on the term loans.
As of both December 31, 2023 and December 31, 2022, there were no borrowings outstanding on the revolving credit facility and $200.0 million of borrowings outstanding on the term loans.
We capitalized interest associated with redevelopment and expansion activities of approximately $2.6 million, $0.7 million and $1.6 million during the years ended December 31, 2022, 2021 and 2020, respectively.
We capitalized interest associated with development, redevelopment and expansion activities of approximately $8.5 million, $2.6 million and $0.7 million during the years ended December 31, 2023, 2022 and 2021, respectively.
We recognized an aggregate gain of approximately $112.2 million from the sale of four properties during the year ended December 31, 2022, as compared to an aggregate gain of approximately $16.6 million from the sale of two properties in the prior year.
We recognized an aggregate gain of approximately $38.2 million from the sale of four properties during the year ended December 31, 2023, as compared to an aggregate gain of approximately $112.2 million from the sale of four properties in the prior year.
As of December 31, 2022, our buildings and improved land parcels were approximately 98.6% and 92.5% leased, respectively, to 569 customers, the largest of which accounted for approximately 4.3% of our total annualized base rent.
As of December 31, 2023, our buildings and improved land parcels were approximately 98.5% and 94.6% leased, respectively, to 580 customers, the largest of which accounted for approximately 3.6% of our total annualized base rent.
Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020: Discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020 was included in our Annual Report on Form 10-K for the year ended December 31, 2021 on page 37 under Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations”, which was filed with the Securities and Exchange Commission on February 9, 2022.
Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021: Discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021 was included in our Annual Report on Form 10-K for the year ended December 31, 2022 on page 39 under Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations”, which was filed with the SEC on February 8, 2023.
As of December 31, 2022 and 2021, we held cash and cash equivalents totaling approximately $26.4 million and $204.4 million, respectively.
As of December 31, 2023 and 2022, we held cash and cash equivalents totaling approximately $165.4 million and $26.4 million, respectively.
In addition, approximately $0.6 million of the increase in cash-basis same store NOI for the year ended December 31, 2022 related to properties that were acquired vacant or with near term expirations in 2020. 52 Table of Contents
In addition, approximately $2.0 million of the increase in cash-basis same store NOI for the year ended December 31, 2023 related to properties that were acquired vacant or with near term expirations in 2021. 51 Table of Contents
Dividend and Distribution Activity On February 7, 2023, our board of directors declared a cash dividend in the amount of $0.40 per share of our common stock payable on April 6, 2023 to the stockholders of record as of the close of business on March 31, 2023.
Dividend and Distribution Activity On February 6, 2024, our board of directors declared a cash dividend in the amount of $0.45 per share of our common stock payable on April 5, 2024 to the stockholders of record as of the close of business on March 28, 2024.
Cash rents on new and renewed leases totaling approximately 2.2 million square feet and 19.1 acres commencing during the year ended December 31, 2022 increased approximately 49.5% compared to the prior year.
Cash rents on new and renewed leases totaling approximately 2.1 million square feet and 11.4 acres commencing during the year ended December 31, 2023 increased approximately 55.5% compared to the prior year.
Cash-basis same store NOI increased by approximately $14.6 million for the year ended December 31, 2022 compared to the prior year primarily due to increased rental revenue on new and renewed leases and increased occupancy.
Cash-basis same store NOI increased by approximately $22.4 million for the year ended December 31, 2023 compared to the prior year primarily due to increased rental revenue on new and renewed leases.
The increase in total property operating expenses was primarily due to an increase of approximately $8.7 million attributable to property acquisitions during 2022 and 2021 as well increases in insurance premiums, real estate taxes related to annual rate increases and utilities expenses incurred at certain of our properties. Depreciation and amortization.
The increase in total property operating expenses was primarily due to an increase of approximately $7.3 million attributable to property acquisitions during 2023 and 2022 as well as increases in insurance premiums and real estate taxes related to annual rate increases. Depreciation and amortization.
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. There can be no assurance that we will be able to maintain our current credit rating.
Fitch Ratings assigned us an issuer rating of BBB with a positive outlook. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. There can be no assurance that we will be able to maintain our current credit rating.
The total aggregate initial investment was approximately $422.3 million, including $13.0 million in capitalized closing costs and acquisition costs and $14.1 million in assumed intangible liabilities and $19.6 million in other credits related to near term capital expenditures at the Countyline #29 & #30 properties. 2 Stabilized capitalization rates, referred to herein as stabilized cap rates, are calculated, at the time of acquisition, as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property.
The total aggregate initial investment was approximately $512.5 million, including $6.1 million in capitalized closing costs and acquisition costs and $42.9 million in assumed intangible liabilities and $20.5 million in other credits related to near term capital expenditures, free rent and tenant improvements at multiple properties. 2 Stabilized capitalization rates, referred to herein as stabilized cap rates, are calculated, at the time of acquisition, as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property.
Equity Sources of Liquidity The following sets forth certain information regarding our current at-the-market common stock offering program as of December 31, 2022: ATM Stock Offering Program Date Implemented Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available (in thousands) $300 Million ATM Program June 11, 2021 $ 300,000 $ 142,583 The table below sets forth the activity under our at-the-market common stock offering programs during the years ended December 31, 2022 and 2021, respectively: For the Year Ended Shares Sold Weighted Average Price Per Share Net Proceeds (in thousands) Sales Commissions (in thousands) December 31, 2022 1,286,125 $ 61.31 $ 77,707 $ 1,143 December 31, 2021 2,569,771 $ 63.23 $ 160,127 $ 2,356 41 Table of Contents Debt Sources of Liquidity As of December 31, 2022, we had $100.0 million of senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million of senior unsecured notes that mature in October 2027, $100.0 million of senior unsecured notes that mature in July 2028, $100.0 million of senior unsecured notes that mature in December 2029, $125.0 million of senior unsecured notes that mature in August 2030, and $50.0 million of senior unsecured notes that mature in July 2031 (collectively, the “Senior Unsecured Notes”).
The following sets forth certain information regarding our current at-the-market common stock offering program as of December 31, 2023: ATM Stock Offering Program Date Implemented Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available (in thousands) $500 Million ATM Program September 6, 2023 $ 500,000 $ 305,815 The following table sets forth the activity under our at-the-market common stock offering programs during the years ended December 31, 2023 and 2022, respectively: For the Year Ended Shares Sold Weighted Average Price Per Share Net Proceeds (in thousands) Sales Commissions (in thousands) December 31, 2023 5,152,279 $ 61.15 $ 310,502 $ 4,569 December 31, 2022 1,286,125 $ 61.31 $ 77,707 $ 1,143 40 Table of Contents Debt Sources of Liquidity As of December 31, 2023, we had $100.0 million of senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million of senior unsecured notes that mature in October 2027, $100.0 million of senior unsecured notes that mature in July 2028, $100.0 million of senior unsecured notes that mature in December 2029, $125.0 million of senior unsecured notes that mature in August 2030, and $50.0 million of senior unsecured notes that mature in July 2031 (collectively, the “Senior Unsecured Notes”).
Approxi ma tely 93.5% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years.
Approxi m ately 95.7% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years.
The following table sets forth the cash dividends paid or payable per share during the year ended December 31, 2022: 35 Table of Contents For the Three Months Ended Security Dividend per Share Declaration Date Record Date Date Paid March 31, 2022 Common stock $ 0.34 February 8, 2022 March 25, 2022 April 8, 2022 June 30, 2022 Common stock $ 0.34 May 3, 2022 June 30, 2022 July 14, 2022 September 30, 2022 Common stock $ 0.40 August 2, 2022 September 30, 2022 October 14, 2022 December 31, 2022 Common stock $ 0.40 November 1, 2022 December 30, 2022 January 13, 2023 Contractual Commitments As of February 7, 2023, we have outstanding contracts with third-party sellers to acquire four industrial properties for a total aggregate purchase price of $259.5 million, as described under the heading “Material Cash Commitments” in this Annual Report on Form 10-K.
The following table sets forth the cash dividends paid or payable per share during the year ended December 31, 2023: For the Three Months Ended Security Dividend per Share Declaration Date Record Date Date Paid March 31, 2023 Common Stock $ 0.40 February 7, 2023 March 31, 2023 April 6, 2023 June 30, 2023 Common Stock $ 0.40 May 2, 2023 June 30, 2023 July 14, 2023 September 30, 2023 Common Stock $ 0.45 August 1, 2023 September 29, 2023 October 13, 2023 December 31, 2023 Common Stock $ 0.45 October 31, 2023 December 15, 2023 January 5, 2024 Contractual Commitments As of February 6, 2024, we had one outstanding contract with a third-party seller to acquire one industrial property for a total purchase price of approximately $12.0 million, as described under the heading “Material Cash Commitments” in this Annual Report on Form 10-K.
Our outlook is subject to the risks set forth in this Annual Report on Form 10-K, including the risks set form in “Item 1A - Risk Factors”. Inflation The U.S. economy experienced a significant increase in inflation rates throughout 2022. A wide variety of industries and sectors are affected by increasing commodity prices.
Our outlook is subject to the risks set forth in this Annual Report on Form 10-K, including the risks set form in “Item 1A - Risk Factors”. Inflation The U.S. economy experienced a significant increase in inflation rates throughout 2022 and 2023.
In recent years, inflation has increased construction costs, including tenant improvements and capital projects, goods and labor, and operating costs. Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.
Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.
FFO increased by approximately $8.7 million and $30.1 million for the three months and year ended December 31, 2022, respectively, compared to the same periods from the prior year due primarily to property acquisitions during 2021 and 2022 as well as same store NOI growth of approximately $2.5 million and $11.0 million for the three months and year ended December 31, 2022, respectively, compared to the same periods from the prior year.
FFO increased by approximately $8.9 million and $34.6 million for the three months and year ended December 31, 2023, respectively, compared to the same periods from the prior year due primarily to property acquisitions during 2022 and 2023 as well as same store NOI growth of approximately $3.0 million and $15.8 million for the three months and year ended December 31, 2023, respectively, compared to the same periods from the prior year.
Total property operating expenses increased approximately $12.7 million during the year ended December 31, 2022 compared to the prior year.
Total property operating expenses increased approximately $10.2 million during the year ended December 31, 2023 compared to the prior year.
Net cash used in investing activities was approximately $337.7 million and $666.4 million for the years ended December 31, 2022 and 2021, respectively, which consisted primarily of cash paid for property acquisitions of approximately $407.6 million and $645.0 million, respectively, additions to capital improvements of approximately $92.2 million and $62.6 million, respectively, partially offset by net proceeds from sales of real estate investments of approximately $162.1 million and $41.1 million, respectively.
Net cash used in investing activities was approximately $570.4 million and $337.7 million for the years ended December 31, 2023 and 2022, respectively, which consisted primarily of cash paid for property acquisitions of approximately $466.8 million and $407.6 million, respectively, additions to capital improvements of approximately $176.6 million and $92.2 million, respectively, and was partially offset by proceeds from dispositions of approximately $73.1 million and $162.1 million, respectively.
Acquisition costs and other increased approximately $1.3 million during the year ended December 31, 2022 compared to the prior year primarily due to environmental remediation at our Avenue A property of approximately $1.0 million. Interest and other income. Interest and other income for the year ended December 31, 2022 remained consistent with the prior year. Interest expense, including amortization.
Acquisition costs and other decreased approximately $1.2 million during the year ended December 31, 2023 compared to the prior year primarily due to environmental remediation at our Avenue A property of approximately $1.0 million during the year ended December 31, 2022 . Interest and other income.
Nevertheless, our acquisition volume will be dependent on both the quality and pricing of the opportunity set and the price of our stock relative to net asset value (“NAV”). Those conditions, not knowable in advance, will determine our results. We will continue to sell assets and redeploy the capital to enhance NAV per share or return the capital to shareholders.
Nevertheless, our acquisition volume will be dependent on both the quality and pricing of the opportunity set and the price of our stock relative to net asset value (“NAV”). Those conditions, not knowable in advance, will determine our results.
In general, we prefer to utilize local third-party property managers for day-to-day property management and as a source of acquisition opportunities. We believe outsourcing property management is cost effective and provides us with operational flexibility.
In general, we prefer to utilize local third-party property managers for day-to-day property management and as a source of acquisition opportunities. We believe outsourcing property management is cost effective and provides us with operational flexibility. We may directly manage properties in the future if we determine such direct property management is in our best interest.
Total revenues increased approximately $54.3 million for the year ended December 31, 2022 compared to the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2022 and 2021 and an increase in occupancy rate.
Total revenues increased approximately $47.4 million for the year ended December 31, 2023 compared to the prior year due primarily to increased revenue on new and renewed leases and property acquisitions during 2023 and 2022.
During 2022, we issued an aggregate of 1,286,125 shares of common stock at a weighted average offering price of $61.31 per share under the $300 Million ATM Program, resulting in net proceeds of approximately $77.7 million and paying total compensation to the applicable sales agents of approximately $1.1 million.
During 2023, we issued an aggregate of 5,152,279 shares of common stock at a weighted average offering price of $61.15 per share under the $300 Million ATM Program and the $500 Million ATM Program, resulting in net proceeds of approximately $310.5 million and paying total compensation to the applicable sales agents of approximately $4.6 million.
Depreciation and amortization increased approximately $15.1 million during the year ended December 31, 2022 compared to the prior year primarily due to property acquisitions during 2022 and 2021 and the sale of four properties during the year ended December 31, 2022. General and administrative expenses.
Depreciation and amortization increased approximately $7.5 million during the year ended December 31, 2023 compared to the prior year primarily due to property acquisitions during 2023 and 2022. General and administrative expenses.
See “Note 2 - Significant Accounting Policies” in our notes to consolidated financial statements for more information regarding our adoption of this standard. 2 Includes 2021 and 2022 acquisitions and dispositions, 22 improved land parcels and three properties under redevelopment as of December 31, 2022. 3 Includes straight-line rents and amortization of lease intangibles.
See “Note 2 - Significant Accounting Policies” in our notes to consolidated financial statements for more information regarding our adoption of this standard. 2 Includes 2022 and 2023 acquisitions and dispositions, nine improved land parcels, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development. 3 Includes straight-line rents and amortization of lease intangibles.
Gain on sales of real estate investments increased approximately $95.5 million for the year ended December 31, 2022 compared to the prior year.
Gain on sales of real estate investments decreased approximately $74.0 million for the year ended December 31, 2023 compared to the prior year.
If tenants fail to make contractual lease payments that are greater than our allowance for doubtful accounts, security deposits and letters of credit, then we may have to recognize additional doubtful account charges in future periods.
If tenants fail to make contractual lease payments that are greater than our allowance for doubtful accounts, security deposits and letters of credit, then we may have to recognize additional doubtful account charges in future periods. We monitor the liquidity and creditworthiness of our tenants on an on-going basis by reviewing their financial condition periodically as appropriate.
ATM Program We have an at-the-market equity offering program (the “$300 Million ATM Program”) pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million ($142.6 million remaining as of December 31, 2022) in amounts and at times as we determine from time to time.
We used the net proceeds for acquisitions. 35 Table of Contents ATM Program We have an at-the-market equity offering program (the "$500 Million ATM Program") pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $500.0 million ($305.8 million remaining as of December 31, 2023) in amounts and at times as we determine from time to time.
There is no assurance that we will acquire the properties under contract because the proposed acquisitions are subject to the completion of satisfactory due diligence and various closing conditions. Outlook Current operating conditions in our six markets for our business are excellent.
There is no assurance that we will acquire the property under contract because the proposed acquisition is subject to the completion of satisfactory due diligence and various closing conditions. Outlook Current operating conditions in our six markets for our business have slowed over the last year, yet remain good within our submarkets.
The following tables summarize our debt maturities and principal payments as of and for the year ended December 31, 2022, and market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the years ended December 31, 2022 and 2021 (dollars in thousands, except per share data): Credit Facility Term Loan Senior Unsecured Notes Total Debt 2023 $ — $ — $ — $ — 2024 — — 100,000 100,000 2025 — — — — 2026 — — 50,000 50,000 2027 — 100,000 50,000 150,000 Thereafter — 100,000 375,000 475,000 Total Debt — 200,000 575,000 775,000 Deferred financing costs, net — (1,007) (3,175) (4,182) Total Debt, net $ — $ 198,993 $ 571,825 $ 770,818 Weighted average interest rate N/A 5.5% 3.1% 3.7% 42 Table of Contents As of December 31, 2022 As of December 31, 2021 Total Debt, net $ 770,818 $ 720,670 Equity Common Stock Shares Outstanding 1 76,881,147 75,344,302 Market Price 2 $ 56.87 $ 85.29 Total Equity 4,372,231 6,426,116 Total Market Capitalization $ 5,143,049 $ 7,146,786 Total Debt-to-Total Investments in Properties 3 22.7% 24.5% Total Debt-to-Total Market Capitalization 4 15.0% 10.1% Floating Rate Debt as a % of Total Debt 5 25.8% 13.8% Net Income $ 198,014 $ 87,254 Adjusted EBITDA 6 $ 187,097 $ 149,094 Interest Coverage 7 7.8 x 8.3 x Fixed Charge Coverage 8 7.1 x 8.0 x Total Debt-to-Adjusted EBITDA 9 3.7 x 4.5 x Weighted Average Maturity of Total Debt (years) 5.3 5.9 1 Includes 356,632 and 289,186 shares of unvested restricted stock outstanding as of December 31, 2022 and 2021, respectively.
The following tables summarize our debt maturities and principal payments as of and for the year ended December 31, 2023, and market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the years ended December 31, 2023 and 2022 (dollars in thousands, except per share data): Credit Facility Term Loan Senior Unsecured Notes Total Debt 2024 $ — $ — $ 100,000 $ 100,000 2025 — — — — 2026 — — 50,000 50,000 2027 — 100,000 50,000 150,000 2028 — 100,000 100,000 200,000 Thereafter — — 275,000 275,000 Total Debt — 200,000 575,000 775,000 Deferred financing costs, net — (855) (2,582) (3,437) Total Debt, net $ — $ 199,145 $ 572,418 $ 771,563 Weighted average interest rate n/a 6.6% 3.1% 4.0% 41 Table of Contents As of December 31, 2023 As of December 31, 2022 Total Debt, net $ 771,563 $ 770,818 Equity Common Stock Shares Outstanding 1 87,995,761 76,881,147 Market Price 2 $ 62.67 $ 56.87 Total Equity 5,514,694 4,372,231 Total Market Capitalization $ 6,286,257 $ 5,143,049 Total Debt-to-Total Investments in Properties 3 19.1% 22.7% Total Debt-to-Total Market Capitalization 4 12.3% 15.0% Floating Rate Debt as a % of Total Debt 5 25.8% 25.8% Net Income $ 151,457 $ 198,014 Adjusted EBITDA 6 $ 225,000 $ 187,097 Interest Coverage 7 9.1 x 7.8 x Fixed Charge Coverage 8 6.8 x 7.1 x Net Debt-to-Adjusted EBITDA 9 2.6 x 3.6 x Weighted Average Maturity of Total Debt (years) 4.3 5.3 1 Includes 419,057 and 356,632 shares of unvested restricted stock outstanding as of December 31, 2023 and 2022, respectively.
As a result, we believe that the use of FFO, together with the required GAAP presentations, provide a more complete understanding of our operating performance. 47 Table of Contents The following table reflects the calculation of FFO reconciled from net income for the three months and years ended December 31, 2022, 2021 and 2020: For the Three Months Ended December 31, For the Three Months Ended December 31, 2022 2021 $ Change % Change 2021 2020 $ Change % Change Net income $ 58,880 $ 32,259 $ 26,621 82.5 % $ 32,259 $ 13,513 $ 18,746 138.7 % Gain on sales of real estate investments (36,118) (13,442) (22,676) 168.7 % (13,442) — (13,442) n/a Depreciation and amortization 18,536 13,707 4,829 35.2 % 13,707 11,192 2,515 22.5 % Non-real estate depreciation (16) (22) 6 (27.3) % (22) (11) (11) n/a Allocation to participating securities 1 (192) (126) (66) 52.4 % (126) (73) (53) 72.6 % Funds from operations attributable to common stockholders 2 $ 41,090 $ 32,376 $ 8,714 26.9 % $ 32,376 $ 24,621 $ 7,755 31.5 % Basic FFO per common share $ 0.54 $ 0.44 $ 0.10 22.7 % $ 0.44 $ 0.36 $ 0.08 22.2 % Diluted FFO per common share $ 0.54 $ 0.44 $ 0.10 22.7 % $ 0.44 $ 0.36 $ 0.08 22.2 % Weighted average basic common shares 76,048,579 73,380,519 73,380,519 68,245,315 Weighted average diluted common shares 76,145,382 73,735,244 73,735,244 68,652,454 For the Year Ended December 31, For the Year Ended December 31, 2022 2021 $ Change % Change 2021 2020 $ Change % Change Net income $ 198,014 $ 87,254 $ 110,760 126.9 % $ 87,254 $ 79,795 $ 7,459 9.3 % Gain on sales of real estate investments (112,166) (16,627) (95,539) 574.6 % (16,627) (26,766) 10,139 (37.9) % Depreciation and amortization 65,763 50,687 15,076 29.7 % 50,687 45,875 4,812 10.5 % Non-real estate depreciation (72) (74) 2 (2.7) % (74) (70) (4) 5.7 % Allocation to participating securities 1 (656) (428) (228) 53.3 % (428) (496) 68 (13.7) % Funds from operations attributable to common stockholders 2 $ 150,883 $ 120,812 $ 30,071 24.9 % $ 120,812 $ 98,338 $ 22,474 22.9 % Basic FFO per common share $ 2.00 $ 1.71 $ 0.29 17.0 % $ 1.71 $ 1.45 $ 0.26 17.9 % Diluted FFO per common share $ 2.00 $ 1.71 $ 0.29 17.0 % $ 1.71 $ 1.44 $ 0.27 18.8 % Weighted average basic common shares 75,498,107 70,534,202 70,534,202 67,762,927 Weighted average diluted common shares 75,586,480 70,793,670 70,793,670 68,170,066 1 To be consistent with our policies of determining whether instruments granted in share-based payment transactions are participating securities and accounting for earnings per share, the FFO per common share is adjusted for FFO distributed through declared dividends (if any) and allocated to all participating securities (weighted average common shares outstanding and unvested restricted shares outstanding) under the two-class method.
The following table reflects the calculation of FFO reconciled from net income for the three months and years ended December 31, 2023, 2022 and 2021 (dollars in thousands except per share data): 46 Table of Contents For the Three Months Ended December 31, For the Three Months Ended December 31, 2023 2022 $ Change % Change 2022 2021 $ Change % Change Net income $ 57,557 $ 58,880 $ (1,323) (2.2) % $ 58,880 $ 32,259 $ 26,621 82.5 % Gain on sales of real estate investments (25,899) (36,118) 10,219 (28.3) % (36,118) (13,442) (22,676) 168.7 % Depreciation and amortization 18,583 18,536 47 0.3 % 18,536 13,707 4,829 35.2 % Non-real estate depreciation (40) (16) (24) 150.0 % (16) (22) 6 (27.3) % Allocation to participating securities 1 (243) (192) (51) 26.6 % (192) (126) (66) 52.4 % FFO attributable to common stockholders $ 49,958 $ 41,090 $ 8,868 21.6 % $ 41,090 $ 32,376 $ 8,714 26.9 % Basic FFO per common share $ 0.58 $ 0.54 $ 0.04 7.4 % $ 0.54 $ 0.44 $ 0.10 22.7 % Diluted FFO per common share $ 0.58 $ 0.54 $ 0.04 7.4 % $ 0.54 $ 0.44 $ 0.10 22.7 % Basic weighted average common shares outstanding 85,550,842 76,048,579 76,048,579 73,380,519 Diluted weighted average common shares outstanding 85,647,463 76,145,382 76,145,382 73,735,244 For the Year Ended December 31, For the Year Ended December 31, 2023 2022 $ Change % Change 2022 2021 $ Change % Change Net income $ 151,457 $ 198,014 $ (46,557) (23.5) % $ 198,014 $ 87,254 $ 110,760 126.9 % Gain on sales of real estate investments (38,156) (112,166) 74,010 (66.0) % (112,166) (16,627) (95,539) 574.6 % Depreciation and amortization 73,219 65,763 7,456 11.3 % 65,763 50,687 15,076 29.7 % Non-real estate depreciation (147) (72) (75) 104.2 % (72) (74) 2 (2.7) % Allocation to participating securities 1 (876) (656) (220) 33.5 % (656) (428) (228) 53.3 % FFO attributable to common stockholders $ 185,497 $ 150,883 $ 34,614 22.9 % $ 150,883 $ 120,812 $ 30,071 24.9 % Basic FFO per common share $ 2.23 $ 2.00 $ 0.23 11.5 % $ 2.00 $ 1.71 $ 0.29 17.0 % Diluted FFO per common share $ 2.22 $ 2.00 $ 0.22 11.0 % $ 2.00 $ 1.71 $ 0.29 17.0 % Basic weighted average common shares outstanding 83,169,028 75,498,107 75,498,107 70,534,202 Diluted weighted average common shares outstanding 83,371,099 75,586,480 75,586,480 70,793,670 1 To be consistent with our policies of determining whether instruments granted in share-based payment transactions are participating securities and accounting for earnings per share, the FFO per common share is adjusted for FFO distributed through declared dividends (if any) and allocated to all participating securities (weighted average common 47 Table of Contents shares outstanding and unvested restricted shares outstanding) under the two-class method.
These estimated stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in this Annual Report on Form 10-K and in our other public filings.
These estimated stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to 34 Table of Contents stabilized cap rates and those risk factors contained in this Annual Report on Form 10-K and in our other public filings. 4 Collectively, “Countyline Phase IV”, a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings located in Countyline, immediately adjacent to our seven buildings within Countyline.
As of December 31, 2022, the same store pool consisted of 197 buildings aggregating approximately 12.1 million square feet representing approximately 79.4% of our total square feet owned and 24 improved land parcels consisting of approximately 91.5 acres representing approximately 56.7% of our total acreage owned.
As of December 31, 2023, the same store pool consisted of 224 buildings aggregating approximately 13.1 million square feet representing approximately 81.5% of our total square feet owned and 36 improved land parcels consisting of approximately 113.7 acres representing approximately 74.6% of our total acreage owned.
We are a party to the Amended Facility, which consists of a $400.0 million revolving credit facility that matures in August 2025, a $100.0 million term loan that matures in January 2027 and a $100.0 million term loan that matures in January 2028.
Our Sixth Amended and Restated Senior Credit Agreement (as amended, the “Amended Facility”) consists of a $400.0 million revolving credit facility that matures in August 2025, a $100.0 million term loan that matures in January 2027 and a $100.0 million term loan that matures in January 2028.
The following table summarizes certain information with respect to the redevelopment properties completed during the year ended December 31, 2022: Property Name Location Total Investment (in thousands) 1 Estimated Stabilized Cap Rate 2 Square Feet Completion Quarter America's Gateway Miami, FL $ 7,500 6.6 % 51,800 Q1 2022 Countyline #29 & #30 Hialeah, FL 75,539 3.8 % 407,084 Q2/Q3 2022 73rd Street Miami, FL 20,200 8.1 % 128,844 Q3 2022 Total/Weighted Average $ 103,239 4.8 % 587,728 1 Total investment for the properties includes the initial purchase price, buyer’s due diligence and closing costs, redevelopment expenditures, capitalized interest and leasing costs necessary to achieve stabilization. 2 Estimated stabilized cap rates are calculated as estimated annualized cash basis net operating income for the properties stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property.
The following table summarizes certain information with respect to the completed development and redevelopment properties during the year ended December 31, 2023: Property Name Location Total Investment (in thousands) 1 Estimated Stabilized Cap Rate 2 Post-Development Square Feet Post-Development Acreage Completion Quarter Berryessa San Jose, CA $ 26,296 4.9 % — 6.3 Q2 2023 Countyline Building 41 Hialeah, FL 41,200 5.1 % 190,907 — Q4 2023 Total/Weighted Average $ 67,496 5.0 % 190,907 6.3 1 Total investment for the properties includes the initial purchase price, buyer’s due diligence and closing costs, redevelopment expenditures, capitalized interest and leasing costs necessary to achieve stabilization. 2 Estimated stabilized cap rates are calculated as estimated annualized cash basis net operating income for the properties stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property.
As we are currently in a growth phase, acquisition costs are excluded from Adjusted EBITDA to allow for the comparison of our operating performance to that of stabilized companies. 49 Table of Contents The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three months and years ended December 31, 2022, 2021 and 2020: For the Three Months Ended December 31, For the Three Months Ended December 31, 2022 2021 $ Change % Change 2021 2020 $ Change % Change Net income $ 58,880 $ 32,259 $ 26,621 82.5 % $ 32,259 $ 13,513 $ 18,746 138.7 % Gain on sales of real estate investments (36,118) (13,442) (22,676) 168.7 % (13,442) — (13,442) n/a Depreciation and amortization 18,536 13,707 4,829 35.2 % 13,707 11,192 2,515 22.5 % Interest expense, including amortization 7,457 5,207 2,250 43.2 % 5,207 4,195 1,012 24.1 % Stock-based compensation 2,653 2,547 106 4.2 % 2,547 3,472 (925) (26.6) % Acquisition costs and other 374 — 374 n/a — 85 (85) n/a Adjusted EBITDA $ 51,782 $ 40,278 $ 11,504 28.6 % $ 40,278 $ 32,457 $ 7,821 24.1 % For the Year Ended December 31, For the Year Ended December 31, 2022 2021 $ Change % Change 2021 2020 $ Change % Change Net income $ 198,014 $ 87,254 $ 110,760 126.9 % $ 87,254 $ 79,795 $ 7,459 9.3 % Gain on sales of real estate investments (112,166) (16,627) (95,539) 574.6 % (16,627) (26,766) 10,139 (37.9) % Depreciation and amortization 65,763 50,687 15,076 29.7 % 50,687 45,875 4,812 10.5 % Interest expense, including amortization 23,850 18,054 5,796 32.1 % 18,054 15,997 2,057 12.9 % Stock-based compensation 10,171 9,554 617 6.5 % 9,554 9,826 (272) (2.8) % Acquisition costs 1,465 172 1,293 751.7 % 172 271 (99) (36.5) % Adjusted EBITDA $ 187,097 $ 149,094 $ 38,003 25.5 % $ 149,094 $ 124,998 $ 24,096 19.3 % We compute NOI as rental revenues, including tenant expense reimbursements, less property operating expenses.
The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three months and years ended December 31, 2023, 2022 and 2021 (dollars in thousands): 48 Table of Contents For the Three Months Ended December 31, For the Three Months Ended December 31, 2023 2022 $ Change % Change 2022 2021 $ Change % Change Net income $ 57,557 $ 58,880 $ (1,323) (2.2) % $ 58,880 $ 32,259 $ 26,621 82.5 % Gain on sales of real estate investments (25,899) (36,118) 10,219 (28.3) % (36,118) (13,442) (22,676) 168.7 % Depreciation and amortization 18,583 18,536 47 0.3 % 18,536 13,707 4,829 35.2 % Interest expense, including amortization 5,707 7,457 (1,750) (23.5) % 7,457 5,207 2,250 43.2 % Stock-based compensation 3,343 2,653 690 26.0 % 2,653 2,547 106 4.2 % Acquisition costs and other 92 374 (282) (75.4) % 374 — 374 n/a Adjusted EBITDA $ 59,383 $ 51,782 $ 7,601 14.7 % $ 51,782 $ 40,278 $ 11,504 28.6 % For the Year Ended December 31, For the Year Ended December 31, 2023 2022 $ Change % Change 2022 2021 $ Change % Change Net income $ 151,457 $ 198,014 $ (46,557) (23.5) % $ 198,014 $ 87,254 $ 110,760 126.9 % Gain on sales of real estate investments (38,156) (112,166) 74,010 (66.0) % (112,166) (16,627) (95,539) 574.6 % Depreciation and amortization 73,219 65,763 7,456 11.3 % 65,763 50,687 15,076 29.7 % Interest expense, including amortization 24,796 23,850 946 4.0 % 23,850 18,054 5,796 32.1 % Stock-based compensation 13,466 10,171 3,295 32.4 % 10,171 9,554 617 6.5 % Acquisition costs 218 1,465 (1,247) (85.1) % 1,465 172 1,293 751.7 % Adjusted EBITDA $ 225,000 $ 187,097 $ 37,903 20.3 % $ 187,097 $ 149,094 $ 38,003 25.5 % We compute NOI as rental revenues, including tenant expense reimbursements, less property operating expenses.
As of December 31, 2021, the same store pool consisted of 210 buildings aggregating approximately 12.5 million square feet representing approximately 83.0% of our total square feet owned and 19 improved land parcels containing approximately 79.6 acres representing approximately 62.6% of our total acreage owned.
As of December 31, 2023, the same store pool consisted of 224 buildings aggregating approximately 13.1 million square feet representing approximately 81.5% of our total square feet owned and 36 improved land parcels containing approximately 113.7 acres representing approximately 74.6% of our total acreage owned.
We have disposed of 29 properties since inception in 2010 for an aggregate sales price of approximately $576.0 million and a total gain of approximately $248.7 million. 32 Table of Contents 2022 Developments Acquisition Activity During 2022, we acquired 20 industrial properties for a total purchase price of approximately $414.8 million.
We have disposed of 33 properties since inception in 2010 for an aggregate sales price of approximately $653.0 million and a total gain of approximately $286.9 million. 2023 Developments Acquisition Activity During 2023, we acquired seven industrial properties for a total purchase price of approximately $484.0 million.
Net cash provided by financing activities was approximately $631.2 million for the year ended December 31, 2021, which consisted primarily of approximately $456.7 million in net proceeds from the issuance of common stock and the issuance of approximately $275.0 million of senior unsecured notes, partially offset by approximately $84.6 million in equity dividend payments and approximately $11.3 million in mortgage loan payments.
Cash From Financing Activities. Net cash provided by financing activities was approximately $528.9 million for the year ended December 31, 2023, which consisted primarily of approximately $666.3 million in net proceeds from the issuance of common stock, partially offset by approximately $135.9 million in equity dividend payments.
The properties we acquire may be stabilized (fully leased) or unstabilized (have near term lease expirations, be partially or fully vacant and may require physical repositioning).
This expectation is based upon prevailing market conditions and may change over time in response to different prevailing market conditions. The properties we acquire may be stabilized (fully leased) or unstabilized (have near term lease expirations, be partially or fully vacant and may require physical repositioning).
In addition, leases with respect to approximately 71.1% of our total rentable square feet expire within five years which enables us to seek to replace existing leases with new leases at the then-existing market rate. Supplemental Material U.S. Federal Income Tax Considerations The following discussion supplements and updates the disclosures under “Material U.S.
In addition, leases with respect to approximately 72.5% of our total rentable square feet expire within five years which enables us to seek to replace existing leases with new leases at the then-existing market rate.
Disposition Activity During the year ended December 31, 2022, we sold three properties located in the Northern New Jersey/New York City market for a total aggregate sales price of approximately $159.7 million, resulting in a gain of approximately $107.1 million 34 Table of Contents and one property located in the Seattle market for a sales price of approximately $8.6 million, resulting in a gain of approximately $5.1 million.
Disposition Activity During the year ended December 31, 2023, we sold two properties located in the Northern New Jersey/New York City market for a total aggregate sales price of approximately $43.2 million, resulting in a gain of approximately $21.9 million, one property located in the Washington, D.C. market for a sales price of approximately $18.0 million, resulting in a gain of approximately $9.7 million and one property located in the Los Angeles market for a sales price of approximately $15.9 million, resulting in a gain of approximately $6.6 million.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
3 edited+0 added−5 removed3 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
3 edited+0 added−5 removed3 unchanged
2022 filing
2023 filing
Biggest changeAmounts borrowed under our Amended Facility bear interest at a variable rate based on SOFR plus an applicable SOFR margin. The weighted average interest rate on borrowings outstanding under our Amended Facility was 5.5% as of December 31, 2022.
Biggest changeAmounts borrowed under our Amended Facility bear interest at a variable rate based on SOFR plus an applicable SOFR margin. The weighted average interest rate on borrowings outstanding under our Amended Facility was 6.6% as of December 31, 2023.
We expect to replace variable rate debt on a regular basis with fixed rate, long-term debt to finance our assets and operations. As of December 31, 2022, we had $200.0 million of borrowings outstanding under our Amended Facility, none of which were subject to interest rate caps.
We expect to replace variable rate debt on a regular basis with fixed rate, long-term debt to finance our assets and operations. As of December 31, 2023, we had $200.0 million of borrowings outstanding under our Amended Facility, none of which were subject to interest rate caps.
If the SOFR rate were to fluctuate by 0.25%, interest expense would increase or decrease, depending on rate movement, future earnings and cash flows by approximately $0.5 million annually on the total of the outstanding balances on our Amended Facility as of December 31, 2022.
If the SOFR rate were to fluctuate by 0.25%, interest expense would increase or decrease, depending on rate movement, future earnings and cash flows by approximately $0.5 million annually on the total of the outstanding balances on our Amended Facility as of December 31, 2023.
Removed
We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023.
Removed
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or hedging transactions, but as our contracts indexed to LIBOR are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest or hedging costs that are higher than if LIBOR remained available.
Removed
Additionally, although SOFR is the recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest or hedging costs for us.
Removed
It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR.
Removed
As of December 31, 2022, each of the agreements governing our variable rate debt either have been transitioned to SOFR or provide for the replacement of LIBOR if it becomes unavailable during the term of such agreement.