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Article by DailyStocks_admin    (08-29-11 01:58 AM)

Description

DCT Industrial Trust. Managing Director Jeff Phelan bought 58750 shares on 08-24-2011 at $ 4.22

BUSINESS OVERVIEW

Business Overview

Our portfolio primarily consists of high-quality functional bulk distribution warehouses and light industrial properties. The properties we target for acquisition or development are generally characterized by convenient access to major transportation arteries, proximity to densely populated markets and quality design standards that allow our customers’ efficient and flexible use of the buildings. In the future, we intend to continue to focus on properties that exhibit these characteristics in U.S. markets as well as Mexico, where we believe we can achieve favorable returns and leverage our expertise. We seek long-term earnings growth primarily through increasing rents and operating income at existing properties and acquiring and developing high-quality properties located in major distribution markets. In addition, we may recycle our capital by disposing of existing assets and reinvesting the capital into assets when we believe the returns will be more favorable over time.

As of December 31, 2010, the Company owned interests in, managed or had under development approximately 76.3 million square feet of properties leased to more than 840 customers, including:


•

56.7 million consolidated square feet comprising 390 properties owned in our operating portfolio which was 88.9% occupied;


•

14.6 million square feet comprising 45 unconsolidated and managed properties and one managed property on behalf of three institutional capital management joint venture partners;


•

1.0 million consolidated square feet comprising seven properties under development and one property in redevelopment;


•

3.2 million unconsolidated square feet comprising seven properties under development; and


•

0.8 million square feet comprising three operating properties in one of our unconsolidated joint ventures.

As of December 31, 2010, our total consolidated portfolio consisted of 398 properties, each averaging approximately 145,000 square feet and having an average age of 19.5 years.

During the year ended December 31, 2010, we acquired five bulk industrial buildings comprising 0.8 million square feet, five light industrial buildings comprising 0.2 million square feet, and ownership interests in two bulk industrial properties totaling 0.5 million square feet, which are consolidated in our financial statements. We also acquired 19.3 acres of land held for development through a newly formed consolidated joint venture. These acquisitions were completed for a total cost of approximately $111.9 million, including the noncontrolling interests’ share of $14.0 million and acquisition costs of $0.4 million.

During the year ended December 31, 2010, we sold eight operating properties totaling approximately 0.5 million square feet to third parties. The properties were sold for combined gross proceeds of approximately $21.6 million. Two property sales resulted in gains of approximately $2.1 million. Prior to the closing of the remainder of the property sales, we incurred impairment losses totaling $3.5 million, which represented the difference between the carrying value and the fair value of the assets sold, net of sales costs.

We have a broadly diversified tenant base. As of December 31, 2010, our consolidated operating properties had leases with more than 760 customers with no single customer accounting for more than 1.9% of the total annualized base rents for these properties. Our ten largest customers occupy 13.5% of our consolidated properties based on square feet and account for 13.8% of the annualized base rent for these properties. We intend to maintain a well-diversified mix of tenants to limit our exposure to any single tenant or industry. We believe that our broad national presence in the top U.S. distribution markets provides geographic diversity and is attractive to users of distribution space which allows us to build strong relationships with our tenants. Furthermore, we are actively engaged in meeting our tenants’ expansion and relocation requirements.

Our primary business objectives are to maximize long-term growth in Funds From Operations, or FFO (see definition in “Selected Financial Data”), and to maximize the value of our portfolio and the total return to our stockholders.

Our principal executive office is located at 518 Seventeenth Street, Suite 800, Denver, Colorado 80202; our telephone number is (303) 597-2400. We also maintain regional offices in Atlanta, Georgia; Cincinnati, Ohio; Dallas, Texas; Houston, Texas; Moonachie, New Jersey; Newport Beach, California; Orlando, Florida; and Monterey, Mexico. Our website address is www.dctindustrial.com.

Business Strategy

Our primary business objectives are to maximize long-term growth in FFO, and to maximize the value of our portfolio and the total return to our stockholders. The strategies we intend to execute to achieve these objectives include:


•

Maximizing Cash Flows From Existing Properties . We intend to maximize the cash flows from our existing properties by active leasing and management, maintaining strong customer relationships, controlling operating expenses and physically maintaining the quality of our properties. Renewing tenants, leasing space and effectively managing expenses are critical in the current market environment and are the day to day focus of our operations team.


•

Effectively Deploying Capital. We seek to acquire properties that meet our asset, location and financial criteria at prices and potential returns which we believe are attractive. We have indentified certain markets and sub-markets where we focus our efforts on identifying buildings to acquire. Acquisitions may include fully-leased buildings or properties where we think our leasing and development expertise can add value. During 2010, we acquired five bulk industrial buildings comprising 0.8 million square feet, five light industrial buildings comprising 0.2 million square feet, and ownership interests in two bulk industrial properties totaling 0.5 million square feet, which are consolidated in our financial statements. We also acquired 19.3 acres of land held for development through a newly formed consolidated joint venture. These acquisitions were completed for a total cost of approximately $111.9 million, including the noncontrolling interests’ share of $14.0 million and acquisition costs of $0.4 million.

•

Managing Our Development Pipeline. In anticipation of the deteriorating demand for industrial space, we ceased entering into new development commitments early in 2008, and have remained focused on leasing the existing pipeline of properties under development. During the year, we signed 2.3 million square feet of leases in our development and redevelopment pipeline.

As markets permit, we will consider developing new buildings where we believe the risk-adjusted returns represent an attractive investment in order to capitalize upon our customer and market relationships.


•

Recycling Capital . We intend to selectively dispose of assets in order to maximize total return to our stockholders by redeploying proceeds from asset sales into new acquisition and development opportunities. Important to managing our balance sheet as well as increasing our overall return on assets is the on-going effort to sell non-strategic assets for redeployment into new, higher growth opportunities. Given our solid balance sheet, strong team of real estate professionals and excellent relationships with investors and brokers, we believe we are well positioned to identify and take advantage of those opportunities. During 2010, we sold eight operating properties totaling approximately 0.5 million square feet to third parties for combined gross proceeds of approximately $21.6 million.


•

Conservatively Managing Our Balance Sheet . We plan to maintain financial metrics, including leverage and coverage ratios, to be consistent with our investment grade peers. This strategy has provided protection from turmoil in the capital markets during the economic downturn and should keep us well positioned to finance acquisition opportunities as they arise. In addition, we believe that a conservatively managed balance sheet provides a competitive long-term cost of capital by lowering borrowing costs over time.

Our Competitive Strengths

We believe that we distinguish ourselves from other owners, operators, acquirers and developers of industrial properties. Although our business strategy reflects current market conditions, we believe our long-term success is supported through the following competitive strengths:


•

High-Quality Industrial Property Portfolio . Our portfolio of industrial properties primarily consists of high-quality bulk distribution facilities specifically designed to meet the needs of distribution and supply companies. As of December 31, 2010, approximately 86% of our consolidated operating portfolio based on square footage was comprised of bulk distribution properties while approximately 12% of our portfolio was comprised of light industrial properties. The majority of our properties is specifically designed for use by major distribution users and are readily divisible to meet re-tenanting opportunities. We believe that our concentration of high-quality bulk distribution properties provides us with a competitive advantage in attracting and retaining distribution users and tenants across the markets in which we operate.


•

Experienced and Committed Management Team . Our executive management team collectively has an average of 25 years of commercial real estate experience. Additionally, our executive management team has extensive public company operating experience with all of our senior executives having held senior positions at real estate companies for an average of over 10 years.


•

Strong Operating Platform . We have a team of 57 experienced transaction and property management professionals working in nine market offices to maximize market opportunities effectively through leveraging local expertise, presence and relationships. We believe successfully meeting the needs of our customers and anticipating and responding to market opportunities will result in achieving superior returns from our properties.


•

Proven Acquisition and Disposition Capabilities . Beginning with our first acquisition in June 2003, we have completed approximately $3.6 billion in industrial real estate acquisitions as of December 31, 2010. Excluding our three major portfolio acquisitions that were each in excess of $200 million, our

average acquisition transaction cost was approximately $20.2 million—demonstrating our ability to access a significant pipeline of smaller acquisitions. Further, consistent with our capital recycling strategy, we have disposed of a cumulative $833.5 million of real estate investments since inception. Our ability to source and sell real estate is driven by the experience of our transaction personnel and our extensive network of industry relationships within the brokerage, development and investor communities.


•

Access to Institutional Co-Investment Capital . DCT has established five joint ventures with three institutional capital partners and our senior management team has broad long-term relationships within the institutional investor community that provide access to capital for both traditional joint ventures and funds or other commingled investment vehicles. These institutions include domestic pension plans, insurance companies, private trusts and international investors. We believe these relationships will allow us to identify sources of institutional demand and appropriately match institutional capital with investment opportunities in our target markets when conditions warrant.


•

Strong Industry Relationships . We believe that our extensive network of industry relationships with the brokerage, development and investor communities will allow us to execute successfully our acquisition and development growth strategies and our institutional capital management strategy. These relationships augment our ability to source acquisitions in off-market transactions outside of competitive marketing processes, capitalize on development opportunities and capture repeat business and transaction activity. Our strong relationships with the tenant and leasing brokerage communities aid in attracting and retaining tenants.


•

Capital Structure . Our capital structure and business plan provides us with sufficient financial capacity to fund future growth. As of December 31, 2010 we had $249.0 million available under our senior unsecured revolving credit facility and 271 of our consolidated properties with a gross book value of $2.0 billion were unencumbered.

Operating Segments

During the second quarter of 2010, we finalized the reorganization of the Company to a regionally organized structure with regional managing directors. As a result, management now measures operating performance and allocates resources by region rather than by individual operating property or building type (bulk distribution, light industrial and other). We manage our operations based on four operating segments and have aggregated our operations into two reportable segments (East and West) in accordance with GAAP. See additional information in “Item 2. Properties” and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to Consolidated Financial Statements, Note 15—Segment Information.”

Competition

We believe the current market for industrial real estate acquisitions to be extremely competitive. We compete for real property investments with pension funds and their advisors, bank and insurance company investment accounts, other real estate investment companies, real estate limited partnerships, individuals and other entities engaged in real estate investment activities, some of which have greater financial resources than we do.

In addition, we believe the leasing of real estate to be highly 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.

CEO BACKGROUND

Thomas G. Wattles . Director since 2003

Mr. Wattles, age 59, is a cofounder of the Company and has been our Executive Chairman since 2003. Mr. Wattles also served as our Chief Investment Officer from March 2003 to September 2005 and was a consultant to Dividend Capital Advisors LLC, which was our external advisor from 2003 through October 2006. Mr. Wattles was a principal of both Dividend Capital Group LLC and Black Creek Capital, LLC, each a Denver-based real estate investment firm, from February 2003 until June 2008. In addition, from April 2005 through October 2006, Mr. Wattles was a manager of Dividend Capital Total Advisors Group LLC, which owns the advisor of Dividend Capital Total Realty Trust Inc. From March 1997 to May 1998, Mr. Wattles served as Chairman of ProLogis, and served as Co-Chairman and Chief Investment Officer from November 1993 to March 1997. Mr. Wattles was a Managing Director of Security Capital Group Incorporated and served in various capacities including Chief Investment Officer from January 1991 to December 2002. Mr. Wattles is also currently a director of Regency Centers Corporation and chairs its Investment Committee and is a member of its Audit Committee. Mr. Wattles holds a Bachelor’s degree and an M.B.A. degree from Stanford University.

Philip L. Hawkins . Director since 2006

Mr. Hawkins, age 55, has been our Chief Executive Officer since October 2006 and our President since September 2009. Mr. Hawkins was the President, Chief Operating Officer and a director of CarrAmerica Realty Corporation, where he had been employed from 1996 until July 2006. CarrAmerica was a public REIT focused on the acquisition, development, ownership and operation of office properties in select markets across the United States and was acquired by a fund managed by The Blackstone Group in July 2006. Prior to joining CarrAmerica, Mr. Hawkins spent approximately 13 years with Jones Lang LaSalle, a real estate services company where he was a director and held various positions involving real estate investment, development, leasing and management. He is a member of the National Association of Real Estate Investment Trusts (NAREIT), the Urban Land Institute, and is a member of NAREIT’s Board of Governors. Mr. Hawkins served as a director of SBA Communications Corporation, a publicly traded wireless tower owner and operator, from August 2004 to May 2009. He holds an M.B.A. from the University of Chicago Graduate School of Business and a Bachelor of Arts degree from Hamilton College.

Phillip R. Altinger . Director since 2006

Mr. Altinger, age 48, is currently a private investor. From 2001 through 2006, he was Executive Director, Corporate Development with Seagate Technology, a leading disc drive company, where he structured, executed and managed various equity and debt investments, as well as mergers-and-acquisitions transactions. Prior to joining Seagate, Mr. Altinger served in numerous senior financial positions at companies including Rio Hotel and Casino, Inc., a casino/hotel, and Catapult Entertainment, a videogame networking company. Mr. Altinger also held investment-banking positions with Volpe Brown Whelan & Company and Salomon Brothers. Mr. Altinger has over 20 years of experience as an investment banker or serving in senior financial positions, and our board of directors has determined that Mr. Altinger qualifies as an audit committee financial expert. Mr. Altinger received his M.B.A. and Bachelor’s degrees in Mechanical Engineering and Economics from Stanford University.

Thomas F. August . Director since 2006

Mr. August, age 62, has served since October 2009 as Chairman of Equity Office Properties Trust, which is currently a private company controlled by The Blackstone Group and is one of the largest owners and managers of office properties in the United States. From February 2008 to August 2009 he served as the Executive Vice President and Chief Operating Officer of Behringer Harvard REIT I, Inc., and from May 2009 through August 2009 he also served as Chief Executive Officer of Behringer Harvard REIT I, Inc. He served as a trustee of Brandywine Realty Trust, a publicly traded REIT, from January 2006 through February 2008. From October 1999 to January 2006, Mr. August had served as President, Chief Executive Officer and a trustee of Prentiss Properties Trust. Prior to that time, he was President and Chief Operating Officer of Prentiss since Prentiss’ initial public offering in October 1996. From 1992 to 1996, Mr. August served as President and Chief Operating Officer of a Prentiss affiliate, Prentiss Properties Limited, Inc. From 1987 to 1992, Mr. August served as Executive Vice President and Chief Financial Officer of Prentiss’ predecessor company. From 1985 to 1987, Mr. August served in executive capacities with Cadillac Fairview Urban Development, Inc. Prior to joining Cadillac Fairview Urban Development in 1985, Mr. August was Senior Vice President of Finance for Oxford Properties, Inc., in Denver, Colorado, an affiliate of a privately-held Canadian real estate firm. Previously, he was a Vice President of Citibank, responsible for real estate lending activities in the Midwest. Mr. August has more than 25 years of experience as a senior executive in the real estate industry, including prior experience as the chief executive officer of a publicly traded REIT. Mr. August holds a Bachelor’s degree from Brandeis University and an M.B.A. degree from Boston University.

John S. Gates, Jr . Director since 2006

Mr. Gates, age 57, has served since August 2010 as the Chairman of the Board of the Regional Transportation Authority of Metropolitan Chicago which is responsible for all passenger transit operations. Mr. Gates has also served since January 1, 2005 as the Chairman and Chief Executive Officer of PortaeCo, a private investment and asset management company. In 1984, Mr. Gates co-founded CenterPoint Properties Trust and served as Co-Chairman and Chief Executive Officer for 22 years. During that period, CenterPoint became one of the largest private property owners in the Metropolitan Chicago Region and the nation’s first publicly traded industrial property REIT. In March 2006, CenterPoint was acquired by the California Public Employees Retirement System and Jones Lang LaSalle for approximately $3.5 billion. In 1979, Mr. Gates joined CB Richard Ellis, and in 1981 co-founded the Chicago office of Jones Lang Wootton (now Jones Lang LaSalle), a global commercial property investment firm. Mr. Gates is a director of The Davis Funds and numerous not-for-profit institutions. Mr. Gates has more than 30 years of experience in the industrial real estate industry. Mr. Gates graduated from Trinity College with a Bachelor’s degree in Economics and Philosophy.

Raymond B. Greer . Director since 2010

Mr. Greer, age 48, has over twenty years of logistics and transportation experience. Mr. Greer has served since February 2011 as the President of BNSF Logistics, LLC, which is an international third party logistics provider and a wholly-owned subsidiary of Burlington Northern Santa Fe, LLC. From March 2005 to January 2010, Mr. Greer served as President and Chief Executive Officer of Greatwide Logistics Services, a non-asset based logistics and transportation services company. Greatwide and its senior lenders filed a Chapter 11 bankruptcy filing in October 2008 to restructure Greatwide’s debt and permit a purchase of the business. From December 2002 to March 2005, Mr. Greer served as President and Chief Executive Officer for Newgistics, Inc., a reverse logistics solutions company. Mr. Greer served as President of Global Network Solutions and Services for i2 Technologies, Inc., a supply chain management software and services company, from February 2002 to November 2002. Mr. Greer has also held senior management positions for Ryder and FedEx Corporation. From June 2005 to April 2007, Mr. Greer served as a director of Kitty Hawk, Inc., a publicly traded air cargo company. Mr. Greer received a Bachelor of Science in Mathematics and Computer Science from the University of Utah, an M.B.A. from Embry-Riddle Aeronautical University and an Executive Masters in Information Systems & Telecommunications from Christian Brothers University.

Tripp H. Hardin . Director since 2002

Mr. Hardin, age 49, is Senior Vice President of Investments with CB Richard Ellis, which is one of the world’s largest real estate services firms. Prior to joining CB Richard Ellis, Mr. Hardin was a principal of Trammell Crow Krombach Partners and was associated with them or their predecessor company since 1986. He has over 25 years of experience in the commercial real estate industry, focusing primarily on the sale and leasing of industrial and office properties. He also has extensive experience in real estate investment and build-to-suit transactions. Mr. Hardin graduated from Stanford University with a Bachelor of Science degree in Industrial Engineering.

John C. O’Keeffe . Director since 2002

Mr. O’Keeffe, age 51, has been active in the construction industry since 1983 and has been associated with Wm. Blanchard Co., a construction management firm located in Springfield, NJ, since 1987. He has served in a variety of capacities at the firm, including estimating, contract negotiation and contract management, contractor management, project management and for the past 10 years, in an executive capacity, managing a variety of large scale healthcare projects. Since 2000, Mr. O’Keeffe has served as the Project Executive of Wm. Blanchard Co. Mr. O’Keeffe graduated from Denison University with a Bachelor of Arts degree.

Bruce L. Warwick . Director since 2005

Mr. Warwick, age 72, is currently a Vice Chairman of The Related Companies, a private real estate development firm, where he oversees the development of various real estate development projects including office and residential properties throughout the United States. Prior to joining The Related Companies in 1998, Mr. Warwick served as Vice Chairman, Development of The Galbreath Company, overseeing development and management in the Eastern Region. He has over 45 years of experience in the real estate development industry. Mr. Warwick received a Bachelor of Arts degree from Colgate University.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

DCT Industrial Trust Inc. is a leading industrial real estate company that owns, operates and develops high-quality bulk distribution and light industrial properties in high-volume distribution markets in the U.S. and Mexico. As of December 31, 2010, the Company owned interests in, managed or had under development approximately 76.3 million square feet of properties leased to more than 840 customers, including:


•

56.7 million consolidated square feet comprising 390 properties owned in our operating portfolio which was 88.9% occupied;


•

14.6 million square feet comprising 45 unconsolidated and managed properties and one managed property on behalf of three institutional capital management joint venture partners;


•

1.0 million consolidated square feet comprising seven properties under development and one property in redevelopment;


•

3.2 million unconsolidated square feet comprising seven properties under development; and


•

0.8 million square feet comprising three operating properties in one of our unconsolidated joint ventures.

Our primary business objectives are to maximize long-term growth in Funds From Operations, or FFO, as defined on page 37, and to maximize the value of our portfolio and the total return to our stockholders. In our pursuit of these long-term objectives, we seek to:


•

maximize cash flows from existing properties;


•

deploy capital into high quality acquisitions or development opportunities which meet our asset location and financial criteria; and


•

recycle capital by selling assets that no longer fit our investment criteria and reinvesting in higher growth opportunities.

Outlook

We seek long-term earnings growth and to maximize value primarily through increasing rents and operating income at existing properties and acquiring and developing high-quality properties in major distribution markets.

Following the return to growth in U.S. Gross Domestic Product in the middle of 2009 and an overall improvement in the economy generally, fundamentals for industrial real estate improved during 2010. According to national statistics, net absorption, the net change in total occupied space, of industrial real estate turned positive in the second quarter of 2010 and continues to improve. Our expectation for 2011 is for moderate economic growth to continue which will result in gradually improving demand for warehouse space as companies’ expand their distribution and production platforms. Rental rates though are expected to remain at low levels as excess supply of available space in most markets will require landlords to remain competitive in order to renew existing leases and sign leases for new requirements. As positive net absorption of warehouse space continues and demand comes more into balance with supply, we expect rental rates to increase. Nationally, rental rates are expected to moderately increase in 2011, though growth is expected to be more robust in 2012 when vacancy rates are expected to drop below 10% of available supply.

Further, we expect meaningful new development of warehouse space to remain abated until rental rates rise to a level to justify financial returns most developers would need to attain project financing or justify construction.

For DCT Industrial, we experienced declining revenues and net operating income in 2010 compared to 2009 due to decreased occupancy and declining rental rates as new leases were signed at rates lower than those of expiring leases. We expect same store revenues and net operating income to continue to decline in 2011 although at a slower pace than in 2010. The benefit of higher occupancy in 2011 is expected to be more than offset by the impact of continued negative releasing spreads as the rates on expiring leases were signed near the peak of market rents.

During 2010, we acquired $107.2 million of operating real estate, including the noncontrolling interests’ share of $14.0 million and acquisition costs of $0.4 million, and $4.7 million of land. We continue to pursue additional acquisitions as we believe that we can acquire well-located real estate at attractive prices and apply our leasing experience and market knowledge to generate attractive returns.

We have $383.0 million of debt principal payments required in 2011 comprised of maturities of fixed-rate secured and unsecured debt, maturities of floating rate borrowings and principal payments. We anticipate refinancing these maturities with a mixture of new unsecured and secured debt which will extend their maturity. Based on current interest rates, the new debt is expected to be at higher interest rates than on the existing borrowings. Our interest expense is expected in increase in 2011 as a result of these new borrowings as well at the impact of financing activity completed in 2010. We anticipate having sufficient cash flow to fund our operating expenses, including costs to maintain our properties and distributions, though we may finance investments, including acquisitions, with the issuance of new shares or through additional borrowings. Please see “Liquidity and Capital Resources” for additional discussion.

Longer term, we believe that prospects remain promising. As the economy continues to grow and vacancy rates decline, rental rates will begin to rise. In most markets, we expect rental rates to recover 20% to 30% from the trough over the coming three to five years. With limited new supply over the next several years, we expect that the operating environment will become increasingly favorable for landlords with both rental rates and occupancies increasing substantially.

Inflation

The U.S. economy has been experiencing relatively low inflation rates and inflation has not had a significant impact on our business. 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. In addition, many of our leases expire within five years which enables us to replace existing leases with new leases at the then-existing market rate.

Significant Transactions

Summary of the year ended December 31, 2010


•

Public Offering


•

On March 23, 2010, we registered a “continuous equity” offering program. Pursuant to this offering, we may sell up to 20 million shares of common stock from time-to-time through March 23, 2013 in “at-the-market” offerings or certain other transactions. Through December 31, 2010, we issued 12.6 million shares of common stock through this program and raised net proceeds of $60.4 million. We used the proceeds from sale of shares for general corporate purposes, which included funding acquisitions and repaying debt.


•

Debt Repayments, Refinancings, and Assumptions


•

In January 2010, we repaid approximately $42.0 million of $112.0 million of debt previously scheduled to mature in 2012. The remaining balance of approximately $70.0 million was refinanced at a fixed rate of 6.11% with a new maturity of 2020 and mortgages on five properties were released. In February 2010, we repaid approximately $49.9 million of $102.9 million of debt previously scheduled to mature in 2011. The remaining balance of approximately $53.0 million was refinanced at a fixed rate of 6.17% with a new maturity of 2019 and mortgages on 11 properties were released. The debt repayments were funded using borrowings under our senior unsecured revolving credit facility and cash flows from operations. These transactions were treated as debt modifications pursuant to GAAP.

•

On June 6, 2010, we repaid $100.0 million of our senior unsecured term loan using funds borrowed on our senior unsecured revolving credit facility and extended the maturity on the remaining $200 million balance for one year. The $200 million term loan has a new interest rate based on LIBOR plus 1.25% to 1.80% or at prime, at our election and was treated as a debt modification pursuant to GAAP.


•

On June 22, 2010, we issued $210.0 million of fixed rate, senior unsecured notes to a group of 12 investors in a private placement offering. These notes were issued with a weighted average term of 8.3 years, include five, seven, eight and 11 year maturities and have a weighted average interest rate of approximately 6.46%. Proceeds from the transaction were used to repay amounts outstanding on our senior unsecured revolving credit facility.


•

On August 17, 2010, we refinanced our senior unsecured revolving credit facility with a syndicated group of banks. The total capacity of the new facility remains at $300.0 million and matures on August 19, 2013 with provisions which, under certain circumstances, allow us to increase the total capacity to $400.0 million. Depending on our consolidated leverage ratio, the facility bears interest at rates ranging from 2.1% to 3.1% over LIBOR or, at our election, 1.1% to 2.1% over prime. As of December 31, 2010, $51.0 million was outstanding on this facility.


•

During the year ended December 31, 2010, we assumed secured, non-recourse notes with an outstanding balance of approximately $19.6 million, including premiums of $1.5 million in connection with three property acquisitions. These assumed notes bear interest at fixed rates ranging from 7.29% to 7.55% and require monthly payments of principal and interest. The maturity dates of the assumed notes range from April 2011 to October 2022.


•

Major Activity with Joint Ventures


•

In December 2010, DCT and Industrial Developments International, Inc. (“IDI”) entered into an amendment to an existing LLC agreement and made additional capital contributions of $6.0 million each to reduce the overall debt to equity ratio of IDI/DCT LLC. Simultaneously, DCT made an additional capital contribution of $24.2 million to pay down our proportionate share of the outstanding debt and accrued interest to zero. At the same time, IDI/DCT, LLC refinanced the remaining $24.1 million of debt, and IDI guaranteed this debt, including future interest and principal payments.


•

Acquisitions


•

During the year ended December 31, 2010, we acquired 12 industrial buildings comprising 1.5 million square feet. We also acquired 19.3 acres of land held for development through a newly formed consolidated joint venture; see “Notes to Consolidated Financial Statements, Note—3 Investment in Properties.” The properties were acquired for a total cost of approximately $111.9 million, including the noncontrolling interests’ share of $14.0 million and acquisition costs of $0.4 million.


•

Dispositions


•

During the year ended December 31, 2010, we sold eight operating properties totaling approximately 0.5 million square feet to third parties. The properties were sold for combined gross proceeds of approximately $21.6 million, resulting in gains of approximately $2.1 million and impairment losses totaling $3.5 million. See “Notes to Consolidated Financial Statements Note 3—Investment in Properties and Note 16—Discontinued Operations” for further information.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

DCT Industrial Trust Inc. is a leading industrial real estate company that owns, operates and develops high-quality bulk distribution and light industrial properties in high-volume distribution markets in the U.S. and Mexico.

We were formed as a Maryland corporation in April 2002 and have elected to be treated as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. We are structured as an umbrella partnership REIT under which substantially all of our current and future business is, and will be, conducted through a majority owned and controlled subsidiary, DCT Industrial Operating Partnership LP (the “operating partnership”), a Delaware limited partnership, for which DCT Industrial Trust Inc. is the sole general partner. We own our properties through our operating partnership and its subsidiaries. As of March 31, 2011, we owned approximately 91% of the outstanding equity interests in our operating partnership.

As used herein, “DCT Industrial Trust,” “DCT,” “the Company,” “we,” “our” and “us” refer to DCT Industrial Trust Inc. and its consolidated subsidiaries and partnerships except where the context otherwise requires.

As of March 31, 2011, the Company owned interests in, managed or had under development approximately 77.3 million square feet of properties leased to more than 840 customers, including:


•

58.6 million consolidated square feet comprising 404 properties owned in our operating portfolio which was 88.1% occupied;


•

14.6 million square feet comprising 45 unconsolidated and managed properties with an occupancy of 92.2% and one managed-only property on behalf of three institutional capital management joint venture partners;


•

0.2 million consolidated square feet comprising one property in redevelopment; and


•

3.9 million square feet comprising ten properties in two of our unconsolidated joint ventures.

Our primary business objectives are to maximize long-term growth in earnings and Funds From Operations, or FFO, as defined on pages 34 and 35, and to maximize the value of our portfolio and the total return to our stockholders. In our pursuit of these long-term objectives, we seek to:


•

maximize cash flows from existing operations;


•

deploy capital into quality acquisitions and development opportunities which meet our asset, location and financial criteria; and


•

recycle capital by selling assets that no longer fit our investment criteria and reinvesting in higher return opportunities.

Outlook

We seek to maximize long-term earnings and value within the context of overall economic conditions, primarily through increasing rents and operating income at existing properties and acquiring and developing high-quality properties in major distribution markets.

Fundamentals for industrial real estate began improving during 2010 following the return to growth in U.S. Gross Domestic Product in the middle of 2009 and an overall improvement in the economy generally. According to national statistics, net absorption, the net change in total occupied space, of industrial real estate turned positive in the second quarter of 2010 and continues to improve. We expect moderate economic growth to continue in 2011 which we expect will result in gradually improving demand for warehouse space as companies expand their distribution and production platforms. Rental rates though are expected to remain at low levels for some time as excess supply of available space in most markets will require landlords to offer competitive rental rates in order to renew existing leases and sign leases for new requirements. Consistent with recent experience and based on current market conditions, we expect GAAP rental rates on new leases signed to continue to decrease by 10% to 15% compared to the rates on expiring leases, as new leases signed at or near the peak of the last cycle are re-leased or renewed. As positive net absorption of warehouse space continues and demand comes more into balance with supply, we expect rental rates to increase. According to a national research company, rental rates are expected to moderately increase later in 2011 in certain markets, though growth is expected to be more robust in 2012 when vacancy rates are expected to drop below 10% of available supply.

Further, we continue to expect meaningful new development of warehouse space to remain abated until rental rates rise to a level to justify financial returns most developers would need to attain project financing or justify construction.

For DCT Industrial, we expect same store revenues and net operating income to continue to decline in 2011 although at a slower pace than in 2010. The benefit of higher occupancy in 2011 is expected to be more than offset by the impact of continued negative releasing spreads as the rates on expiring leases were signed near the peak of market rents.

We continue to pursue acquisitions as we believe that we can acquire well-located real estate at attractive prices and apply our leasing experience and market knowledge to generate attractive returns. During the first quarter of 2011, we acquired $58.1 million of operating real estate, including the noncontrolling interests’ share of $9.8 million and acquisition costs of $0.9 million.

We have $341.7 million of debt principal payments required during the remainder of 2011, comprised of maturities of fixed-rate secured and unsecured debt, maturities of floating-rate borrowings and principal payments. We anticipate refinancing these maturities with a mixture of new fixed and floating-rate debt and extending our average maturity upon completion of the refinancings. Based on current interest rates and extended maturities, the new debt is expected to be at higher interest rates than on the existing borrowings and therefore our interest expense is expected to continue to increase throughout the remainder of 2011 as a result of these new borrowings as well at the impact of 2010 financing activity completed in 2010. We anticipate having sufficient cash flow to fund our operating expenses, including costs to maintain our properties and distributions, though we may finance investments, including acquisitions, with the issuance of new shares or through additional borrowings. Please see “Liquidity and Capital Resources” for additional discussion.

Longer term, we believe that prospects remain promising. As the economy continues to grow and vacancy rates decline, rental rates will begin to rise. In most markets, we expect rental rates to recover 20% to 30% from their low point of the recent recession over the coming three to five years. With limited new supply over the next several years, we expect that the operating environment will become increasingly favorable for landlords with both rental rates and occupancies improving substantially.

Inflation

Although the U.S. economy has recently been experiencing a slight increase of inflation rates, and a wide variety of industries and sectors are affected differently by changing commodity prices, inflation has not had a significant impact on us in our markets of operation. 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. In addition, many of our leases expire within five years which enables us to replace existing leases with new leases at the then-existing market rate.

Summary of the three months ended March 31, 2011 compared to the same period ended March 31, 2010

DCT is a leading industrial real estate company that owns, operates and develops high-quality bulk distribution and light industrial properties in high-volume distribution markets in the U.S. and Mexico. As of March 31, 2011, the Company owned interests in, managed or had under development approximately 77.3 million square feet of properties leased to more than 840 customers, including 14.6 million square feet managed on behalf of three institutional capital management joint venture partners. Also as of March 31, 2011, we consolidated 404 operating properties, and one redevelopment property.

The following table illustrates the changes in rental revenues, rental expenses and real estate taxes, property net operating income, other revenue and other loss and other expenses for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Our same store portfolio includes all operating properties that we owned for the entirety of both the current and prior year reporting periods for which the operations had been stabilized. Non-same store operating properties include properties not meeting the same store criteria and by definition exclude development and redevelopment properties. The same store portfolio for the periods presented totaled 367 operating properties and was comprised of 52.4 million square feet. A discussion of these changes follows in the table below (in thousands).


Cash Flows

“Cash and cash equivalents” were $9.4 million and $17.3 million as of March 31, 2011 and December 31, 2010, respectively. Net cash provided by operating activities increased by $4.1 million to $23.5 million during the three months ended March 31, 2011 compared to $19.4 million during the same period in 2010. This change was primarily due to a decrease in cash paid for accrued expenses and other liabilities during the periods.

Net cash used in investing activities increased $55.6 million to $66.9 million during the three months ended March 31, 2011 compared to $11.3 million during the same period in 2010. This change was primarily due to the acquisition of seven properties which resulted in an increase in cash outflows of $46.7 million and a $2.5 million increase in capital expenditures, as well as changes in various other investing activities.

Net cash provided by (used in) financing activities increased by $54.0 million to $35.5 million during the three months ended March 31, 2011 compared to $(18.5) million during the same period in 2010. This change was primarily due to proceeds of $111.9 million from the equity offering completed in February of 2011, partially offset by an increase in the total net payments on our debt of $52.9 million and additional distributions to stockholders.

Common Stock

As of March 31, 2011, approximately 245.2 million shares of common stock were issued and outstanding.

On February 18, 2011, we issued 21.9 million shares of common stock in a public offering at a price of $5.35 per share for net proceeds of $111.9 million. Also during the three months ended March 31, 2011, we issued approximately 0.3 million shares of common stock related to the redemption of OP Units (see additional information in Note 7 - Noncontrolling Interests), and approximately 0.1 million shares of common stock related to vested shares of restricted stock, phantom shares and stock option exercises, respectively.

On March 23, 2010, we registered a “continuous equity” offering program. Pursuant to this offering, we may sell up to 20 million shares of common stock from time-to-time through March 23, 2013 in “at-the-market” offerings or certain other transactions. Through December 31, 2010, we issued 12.6 million shares of common stock through this program and raised net proceeds of $60.4 million. We did not issue any shares pursuant to this offering during the three months ended March 31, 2011. We may use the proceeds from any sale of shares for general corporate purposes, which may include funding acquisitions and repaying debt.

The net proceeds from the sales of our securities were transferred to our operating partnership for a number of OP Units equal to the shares of common stock sold in our public offerings, including the offerings noted above.

Dividend Reinvestment and Stock Purchase Plan

In April 2007, we began offering shares of our common stock through our Dividend Reinvestment and Stock Purchase Plan (the “Plan”). The Plan permits stockholders to acquire additional shares with quarterly dividends and to make additional cash investments to buy shares directly. Shares of common stock may be purchased in the open market, through privately negotiated transactions, or directly from us as newly issued shares of common stock. All shares issued under the Plan were either acquired in the open market or issued.

Distributions

During the three months ended March 31, 2011 and 2010, our board of directors declared distributions to stockholders totaling approximately $19.1 million and $16.7 million, respectively, including distributions to noncontrolling interests. Existing cash balances, cash provided from operations and borrowings under our senior unsecured revolving credit facility were used for distributions paid during 2011 and 2010.

The payment of quarterly distributions is determined by our board of directors and may be adjusted at its discretion at any time. During April 2011, our board of directors declared quarterly cash dividends of $0.07 per share and unit, payable on July 19, 2011 to stockholders and unitholders in our operating partnership of record as of July 7, 2011.

Outstanding Indebtedness

As of March 31, 2011, our outstanding indebtedness of $1.2 billion consisted of outstanding amounts on our senior unsecured line of credit, mortgage notes and senior unsecured notes, excluding approximately $62.3 million representing our proportionate share of non-recourse debt associated with unconsolidated joint ventures. As of December 31, 2010, our outstanding indebtedness consisted of mortgage notes, senior unsecured notes and a balance on our senior unsecured line of credit and totaled approximately $1.2 billion, excluding $62.3 million representing our proportionate share of non-recourse debt associated with unconsolidated joint ventures.

As of March 31, 2011, the gross book value of our consolidated properties was approximately $3.1 billion and the gross book value of all properties securing our mortgage notes was approximately $0.9 billion. As of December 31, 2010, the gross book value of our consolidated properties was approximately $3.0 billion and the gross book value of all properties securing our mortgage notes was approximately $1.0 billion. Our debt has various covenants with which we were in compliance as of March 31, 2011 and December 31, 2010.

Our debt instruments require monthly or quarterly payments of interest and many require, or will ultimately require, monthly or quarterly repayments of principal. Currently, cash flows from operations are sufficient to satisfy these monthly and quarterly debt service requirements excluding principal maturities and we anticipate that cash flows from operations will continue to be sufficient to satisfy our monthly and quarterly debt service excluding principal maturities. During the three months ended March 31, 2011 and 2010, our debt service, including principal payments and refinancing activities and interest payments, totaled $56.9 million and $229.6 million, respectively.

In March 2011, we repaid a secured seven-year fixed-rate note whose total principal balance was approximately $35.5 million.

As of March 31, 2011, we had one forward-starting swap in place to hedge the variability of cash flows associated with forecasted issuances of debt. This derivative has a notional value of $90.0 million, a LIBOR based swap strike rate of 5.43%, an effective date of June 2012 and a maturity date of September 2012. The associated counterparty is PNC Bank, NA.

Line of Credit

On August 17, 2010, we refinanced our senior unsecured revolving credit facility with a syndicated group of banks. The total capacity of the facility is $300.0 million and matures on August 19, 2013 with provisions which, under certain circumstances, allow us to increase the total capacity to $400.0 million. Depending on our consolidated leverage ratio, the facility bears interest rates ranging from 2.1% to 3.1% over LIBOR or, at our election, 1.1% to 2.1% over prime. We had drawn $34.0 million and $51.0 million on our senior unsecured revolving credit facility as of March 31, 2011 and December 31, 2010, respectively.

CONF CALL

Briana Ochiltree

Thank you, Amy. Hello everyone and thank you for joining DCT Industrial's fourth quarter 2009 conference call.

Before I turn the call over to Phil Hawkins, our President and CEO, I would like to mention that our remarks on today call may include statements that are not historical facts and are considered forward-looking within the meaning of relevant securities laws, including statements regarding projection, plans or future expectations. These forward-looking statements reflect current views and expectations, which are based on currently available information and management assumptions.

We assume no obligation to update these forward-looking statement and we can give no assurance that these expectations will be attained. Actual results may differ materially from those subscribed in the forward-looking statements and will be effected by a variety of risks, including those set forth in our earnings release and in our Form 10-K filed with the SEC as updated by our quarterly reports on Form 10-Q.

Additionally on this conference call we may refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures are available on our supplemental package which can be found in the Investor Relations section of our website at dctindustrial.com. And now I'll turn the call over to Phil.

Philip L. Hawkins

Thank you Briana and good morning everybody. I will provide some general comments on fourth quarter results, the markets, and the company and then Stuart Brown will provide more detail on the quarter as well as our guidance for 2010. Also participating and available to answer any questions directed their way are Daryl Mechem, who runs our west region, Mike Ruen, who runs our east region, and Matt Murphy, our Treasurer.

There are clear signs that both the economy and the industrial leasing markets are beginning to stabilize. Fourth quarter GDP growth of 5.7% may not be sustainable but two consecutive quarters of growth sure beats the alternative, even if driven in large part by government spending. Unemployment dropping below 10% is also good to see.

All of the metrics that serve as good indicators of future industrial demand are also trending positive. [Port] activity, freight volumes, inventory levels relative to sales, capacity utilization, and the purchasing manager’s index all have improved over the past several months which is encouraging.

Nationally, net absorption was decidedly less negative in the fourth quarter. Negative 13 million square feet compared to negative 55 million square feet according to CoStar. Rental rates are no longer in free fall. We expect that both rate and market vacancies will bottom by mid-year if not a little sooner.

Lack of new supply remains a bright spot and since rental rates today are well below levels needed to justify new construction, it should be quite some time before we see a meaningful increase in new building starts. This also bodes well for rental rate growth as rates need to grow 30% to 40% before new construction makes sense.

In terms of DCT’s results, we had another good quarter with operating performance consistent with our expectations and guidance. As I said last quarter, I look forward to the day when the operating environment will produce some positive unexpected surprises but for now I’ll take the lack of any big negatives.

We were especially pleased with leasing results in the quarter The operating portfolio of leasing activity totaled 3 million square feet and our tenant retention rate was 76.3%. Average occupancy in the operating portfolio increased slightly from 87,8% last quarter to 87.9% this quarter.

As expected and reflecting current market conditions, rental rates on signed leases declined 9.0% on a cash basis and 5.3% on a GAAP basis. We made some progress leasing our development portfolio as well. We signed 100,000 square feet of lease in the fourth quarter, another 100,000 square feet so far this quarter, and have an additional 670,000 square feet in advanced lease negotiations in our development pipeline.

As with our operating portfolio, leasing activity has ticked up and we have more quality prospects than just a few months ago. Our goal now is to get them over the goal line as fast as possible.

Tenant credit losses from defaults and bankruptcies, which was our biggest challenge in 2009, improved significantly in the fourth quarter. Bad debt expense totaled $314,000 in the fourth quarter compared to $2.2 million for the first nine months of the year.

In terms of capital deployment, market activity levels remained relatively low but are starting to pick up a little. We are actively pursuing acquisitions in select markets including several off market transactions and are optimistic that we will be able to get some attractive deals done this year that meet our asset location and return criteria.

Continuing to strengthen our operating platform remains a key focus and we made significant progress in the fourth quarter. We have now internalized property management in eight markets and are in the process of opening market offices in Orlando, Houston, and Southern California, putting us even closer to our customers and assets.

As I mentioned before, we are accomplishing the property management internalization and platform expansion with no material increase in cost as the cost of new offices are offset by lower third party management fees and a reduction in staffing and related costs elsewhere.

In summary, I’m pleased with the quarter’s results and our progress in implementing our business plan. We’re also encouraged by early signs of stabilization in the real estate markets. While there will undoubtedly be some additional bumps in the road, we are excited about the opportunities in front of us to grow and strengthen our company.

With that let me turn the call over to Stuart.

Stuart B. Brown

Thank you, Phil. We reported funds from operations in the fourth quarter of 2009 of $0.11 per diluted share. This includes a non-cash charge of $1.4 million or almost $0.01 per share related to the termination of our 2006 outperformance plan which I will come back to in a moment.

For the full year 2009, funds from operations totaled $0.48 per share or $0.50 per share excluding impairment losses and severance costs and was in line with our guidance. With regards to our operating performance versus a year ago, the change in same store net operating income reflects the impact of occupancy declines as we cycle strong earnings growth reported in the fourth quarter of 2008.

Cash same store net operating income declined 8.3% in the fourth quarter from a year ago due to lower total base rent and expense recoveries offset somewhat by lower operating expenses. The total base rent of our same store portfolio declined 5.9% versus the fourth quarter of 2008 which is consistent with the 5.1% decline in average occupancy.

Same store net operating income for the year ended 2009 declined 6.4% on a cash basis. We reported a $2.3 million increase in general and administrative costs in the fourth quarter versus a year ago due to higher non-cash stock based amortization expense. Our 2006 outperformance plan would have fully vested in 2011 so the termination in the fourth quarter resulted in an acceleration of amortization expense.

Additionally, we reduced assumed forfeiture rates on other equity grants due to low employee turnover which resulted in $900,000 of higher stock compensation expense. Excluding these two non-cash charges, general and administrative expenses would have been flat compared to a year ago.

Turning to property transactions, as we discussed last quarter, in October we closed on the sale of an 805,000 square feet bulk distribution building in Indianapolis for $24.2 million.

Regarding our outlook for 2010, we have left our guidance unchanged with FFO ranging from $0.36 to $0.44 per diluted share. As discussed last quarter, cash same store net operating income is projected to decline between 6% and 8% for the year.

Factored into our guidance is a dip in first quarter occupancy due to several expected move outs including the seasonal reduction of month to month and short term leases. First quarter same store operating income and our tenant retention rate are therefore expected to be below the average for the year.

Throughout the turmoil of the past 18 months, we have kept DCT in a very favorable financial position. In 2008 leading into the downturn we disposed of $145 million of assets and executed a 3 year $300 million term loan including extensions.

Further strengthening our balance sheet, we completed a secondary equity offering this past June and today are well positioned to finance high quality accretive real estate acquisitions. Our fixed charge coverage ratio of 3 times and net debt to EBITDA of 7,2 are both solid metrics, especially at this point in the economic downturn.

One of our major initiatives for 2010 is the refinancing of a significant portion of our borrowings. While our financing structure is strong, our debt maturity schedule is weighted too near term with an average maturity of 2.7 years. This is primarily due to the $300 million term loan maturing in June 2011 including extensions. As well as from greater mortgage maturities in 2011 and 2012, which were assumed in a 2005 acquisition.

We have held a number of discussions with lenders and are planning to refinance over $500 million of our $1.1 billion total borrowings this year including renewing our credit facility which expires in December.

To that end by the end of next week we will have closed on the refinancing of $215 million of 2011 and 2012 mortgage maturities by extending $123 million at an average term of 9.6 years and repaying $92 million. The repayment was financed with proceeds remaining from our equity offering, proceeds from the building in Minneapolis, and borrowings under our line of credit.

While we will be very busy over the next 6 months refinancing our term loan and credit facility, we are very confident in our ability to execute. With the prospect of increasing interest rates, we have assumed in our guidance that most refinancing takes place midyear and we maintain a strong bias towards unsecured debt.

We have recently held our annual meeting with lenders and believe that we will have more than ample capacity to meet our needs. Most striking though is the feedback from life companies and other non-bank lenders, however. This group of lenders, which was largely on the sidelines in 2009, has been increasingly active in the reach space and reportedly has a large amount of capital to put to work in 2010 for real estate lending.

Our credit profile and their desire for increased lending to industrial real estate we believe should fit well. It has been amazing how quickly [the spicadus] re-opened for well positioned companies after the near total freezes of capital in early 2009.

I’ll now turn the call back over to the operator for questions. Thank you.

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