Item 2. Properties
Item 2. Properties.
As of December 31, 2020, we owned a total of 222 buildings aggregating approximately 13.2 million square feet, 25 improved land parcels consisting of approximately 91.5 acres and one property under redevelopment expected to contain approximately 0.2 million square feet upon completion. As of December 31, 2020, the buildings and improved land parcels were approximately 97.8% and 98.6% leased, respectively, to 488 customers, the largest of which accounted for approximately 5.4% 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. We invest in several types of industrial real estate, including warehouse/distribution buildings, flex buildings (including light industrial and research and development, or R&D), transshipment buildings and improved land parcels. See “Item 1 – Our Investment Strategy – Industrial Facility General Characteristics” in this Annual Report on Form 10-K for a general description of these types of industrial real estate. 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. See our “Consolidated Financial Statements, Schedule III-Real Estate Investments and Accumulated Depreciation” in this Annual Report on Form 10-K for a detailed listing of our properties.
The following table summarizes by type our investments in real estate as of December 31, 2020:
Type Number of Buildings or Improved Land Parcels Annualized Base Rent (000's) 1
% of Total
Warehouse/distribution 197 $ 124,474 82.0 %
Flex 10 7,617 5.0 %
Transshipment 15 8,056 5.3 %
Improved land 25 11,770 7.7 %
Total 247 $ 151,917 100.0 %
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, 2020, multiplied by 12.
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The following table summarizes by market our investments in real estate as of December 31, 2020:
Los Angeles Northern New Jersey/New York City San Francisco Bay Area Seattle Miami Washington, D.C. Total/Weighted Average
Investments in Real Estate
Number of Buildings 43 62 41 31 27 18 222
Rentable Square Feet 2,584,648 3,555,250 2,056,695 2,098,302 1,370,872 1,534,625 13,200,392
% of Total 19.6 % 26.9 % 15.6 % 15.9 % 10.4 % 11.6 % 100.0 %
Occupancy % as of December 31, 2020 98.8 % 96.0 % 99.2 % 98.7 % 100.0 % 95.4 % 97.8 %
Annualized Base Rent (000’s) 1
$ 24,158 $ 39,241 $ 27,152 $ 20,021 $ 12,960 $ 16,615 $ 140,147
% of Total 17.2 % 28.0 % 19.4 % 14.3 % 9.2 % 11.9 % 100.0 %
Annualized Base Rent 1 Per Occupied Square Foot
$ 9.46 $ 11.50 $ 13.31 $ 9.67 $ 9.45 $ 11.34 $ 10.82
Weighted Average Remaining Lease Term (Years) 2
6.7 4.9 3.3 3.9 3.6 3.7 4.5
Investments in Improved Land
Number of Land Parcels 8 9 2 3 2 1 25
Acres 16.4 48.6 4.0 5.9 3.2 13.4 91.5
% of Total 17.9 % 53.2 % 4.4 % 6.4 % 3.5 % 14.6 % 100.0 %
Occupancy % as of December 31, 2020 100.0 % 100.0 % 68.1 % 100.0 % 100.0 % 100.0 % 98.6 %
Annualized Base Rent (000’s) 1
$ 3,403 $ 5,593 $ 647 $ 888 $ 396 $ 843 $ 11,770
% of Total 28.9 % 47.5 % 5.5 % 7.5 % 3.4 % 7.2 % 100.0 %
Annualized Base Rent 1 Per Occupied Square Foot
$ 4.77 $ 2.69 $ 5.50 $ 3.67 $ 2.87 $ 1.45 $ 3.03
Weighted Average Remaining Lease Term (Years) 2
4.0 4.8 1.2 5.1 2.7 9.0 5.1
Total Investments in Real Estate
Annualized Base Rent (000’s) 1
$ 27,561 $ 44,834 $ 27,799 $ 20,909 $ 13,356 $ 17,458 $ 151,917
Gross Book Value (000’s) 3
$ 462,966 $ 651,417 $ 389,188 $ 356,528 $ 153,918 $ 217,211 $ 2,231,228
% of Total Gross Book Value 20.7 % 29.2 % 17.4 % 16.0 % 7.0 % 9.7 % 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, 2020, multiplied by 12.
2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of December 31, 2020, weighted by the respective square footage.
3 Includes one property under redevelopment expected to contain approximately 0.2 million square feet upon completion, as discussed below.
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As of December 31, 2020, we owned one property under redevelopment expected to contain approximately 0.2 million square feet upon completion with a total expected investment of approximately $64.1 million, including redevelopment costs, capitalized interest and other costs of approximately $61.4 million.
The following table summarizes our capital expenditures incurred during the three months and years ended December 31, 2020 and 2019 (dollars in thousands):
For the Three Months Ended December 31, For the Year Ended December 31,
2020 2019 2020 2019
Building improvements $ 3,210 $ 8,171 $ 15,311 $ 21,385
Tenant improvements 1,163 2,268 2,868 4,669
Leasing commissions 3,698 3,224 13,408 7,813
Redevelopment, renovation and expansion 265 4,336 7,026 27,968
Total capital expenditures 1
$ 8,336 $ 17,999 $ 38,613 $ 61,835
1 Includes approximately $2.0 million and $10.8 million for the three months ended December 31, 2020 and 2019, respectively, and approximately $17.4 million and $42.5 million for the years ended December 31, 2020 and 2019, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 10 and 17 properties for the three months ended December 31, 2020 and 2019, respectively, and 15 and 20 properties for the years ended December 31, 2020 and 2019, respectively.
Our industrial properties are typically subject to leases on a “triple net basis,” in which tenants pay their proportionate share of real estate taxes, insurance and operating costs, or are subject to leases on a “modified gross basis,” in which tenants pay expenses over certain threshold levels. In addition, approximately 92.4% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years. We monitor the liquidity and creditworthiness of our tenants on an on-going basis by reviewing outstanding accounts receivable balances, and as provided under the respective lease agreements, review the tenant’s financial condition periodically as appropriate. As needed, we hold discussions with the tenant’s management about their business and we conduct site visits of the tenant’s operations.
Our top 20 customers based on annualized base rent as of December 31, 2020 are as follows:
Customer Leases Rentable
Square Feet
% of Total
Rentable
Square Feet
Annualized
Base Rent
(000’s) 1
% of Total
Annualized
Base Rent
1 Amazon.com 2
5 471,880 3.6 % $ 8,198 5.4 %
2 FedEx Corporation 3
7 314,519 2.4 % 5,114 3.4 %
3 United States Government 8 300,732 2.3 % 3,748 2.5 %
4 Danaher 3 171,707 1.3 % 3,732 2.5 %
5 District of Columbia 7 234,071 1.8 % 3,334 2.2 %
6 United States Postal Service 3 125,950 1.0 % 2,758 1.8 %
7 DirectBuy Home Improvement 1 230,891 1.7 % 1,915 1.3 %
8 Costco-Innovel Solutions LLC 1 219,910 1.7 % 1,816 1.2 %
9 XPO Logistics 2 180,717 1.4 % 1,732 1.1 %
10 L3 Harris Technologies, Inc. 1 147,898 1.1 % 1,651 1.1 %
11 O'Neill Logistics 2 237,692 1.8 % 1,466 1.0 %
12 Topaz Lighting Corp. 1 190,000 1.4 % 1,463 1.0 %
13 Port Kearny Security, Inc. 4
1 — — % 1,458 1.0 %
14 YRC 2 61,252 0.5 % 1,423 0.9 %
15 Envogue International 1 192,000 1.5 % 1,411 0.9 %
16 Bar Logistics 1 203,263 1.5 % 1,393 0.9 %
17 Lilac Solutions Inc. 1 92,884 0.7 % 1,338 0.9 %
18 Saia Motor Freight Line LLC 1 52,086 0.4 % 1,280 0.8 %
19 Space Systems/Loral LLC 2 107,060 0.8 % 1,246 0.8 %
20 JAM'N Logistics 1 110,336 0.7 % 1,229 0.7 %
Total 51 3,644,848 27.6 % $ 47,705 31.4 %
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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, 2020, multiplied by 12.
2 Includes an improved land parcel consisting of 2.8 acres.
3 Includes two improved land parcels totaling 7.8 acres.
4 Lease area consists of 16.9 acres of improved land.
The following table summarizes the anticipated lease expirations for leases in place at December 31, 2020, without giving effect to 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
(000’s) 2
% of Total
Annualized
Base Rent
2021 1
1,776,606 13.5 % $ 20,516 11.9 %
2022 1,636,765 12.4 % 18,233 10.6 %
2023 1,892,122 14.3 % 24,060 13.9 %
2024 1,569,617 11.9 % 20,766 12.0 %
2025 1,558,816 11.8 % 23,514 13.6 %
Thereafter 4,478,187 33.9 % 65,576 38.0 %
Total 12,912,113 97.8 % $ 172,666 100.0 %
1 Includes leases that expire on or after December 31, 2020 and month-to-month leases totaling approximately 68,412 square feet.
2 Annualized base rent is calculated as monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of December 31, 2020, multiplied by 12.
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, 2020, leases representing approximately 11.9% of the total annualized base rent of our portfolio are scheduled to expire during the year ending December 31, 2021. We currently expect that on average, the rental rates we are likely to achieve on any new (re-leased) or renewed leases for our 2021 expirations will be above the rates currently being paid for the same space. Rent changes on new and renewed leases totaling approximately 0.6 million square feet commencing during the three months ended December 31, 2020 were approximately 10.9% higher as compared to the previous rental rates for that same space, and rent changes on new and renewed leases totaling approximately 2.6 million square feet commencing during the year ended December 31, 2020 were approximately 22.1% higher as compared to the previous rental rates for that same space. We had a tenant retention ratio of 64.3% and 57.7% for the three months and year ended December 31, 2020, respectively. We define tenant retention as the square footage of all leases commenced during the period that are rented by existing tenants divided by the square footage of all expiring leases during the reporting period. The square footage of tenants that default or buy-out prior to expiration of their lease and short-term leases of less than one year, are not included in the calculation.
Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our properties will be re-leased at all or at rental rates above the current average rental rates. 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.
As of December 31, 2020, one property with a gross investment book value of approximately $32.7 million was encumbered by a mortgage loan payable, net of deferred financing costs, totaling approximately $11.3 million, which bears interest at a weighted average fixed annual rate of 5.49%. Subsequent to December 31, 2020, we paid off such mortgage loan.
Item 3. Legal Proceedings.
We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us.
Item 4. Mine Safety Disclosures.
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Not Applicable.
PART II
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.