Item 2. Properties
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. 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. 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 buildings 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, 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.
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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. 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.
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
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$592.0 million, including redevelopment costs, capitalized interest and other costs.
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.
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 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. We monitor the liquidity and creditworthiness of our tenants on an ongoing 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.
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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. 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.
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 %
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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.
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. 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. 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 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. We define tenant retention ratio as the square footage or acreage of all leases commenced during the period that are rented by existing tenants divided by the square footage or acreage of all expiring leases during the reporting period. The square footage or acreage 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 equal to or 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.
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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.
Not Applicable.
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PART II