DCT Industrial Trust Inc (DCT)

DCT 
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DCT Industrial Trust Inc. (DCT)

Citi Global Property Conference

March 6, 2013 09:30 ET

Executives

Phil Hawkins - Chief Executive Officer

Presentation

Unidentified Analyst

Good morning everyone. Welcome to the 9:30 AM Session of Citi’s 2013 Global Property CEO Conference. Before I begin, this session is for investing clients only and if media or other individuals were on the line please disconnect now. We’re very pleased to have with us DCT and CEO, Phil Hawkins. Phil, we’ll turn it over to you for any opening remarks you might have and then we’ll go to Q&A.

Phil Hawkins - Chief Executive Officer

Thanks for joining us on Wednesday morning with flights that have probably being challenged and at (indiscernible) meetings. It’s been a great conference and I could talk a lot about what’s going on clearly the - to me - couple of different topics and I would sort of throw out here, one is what’s going in industrial world and fundamentals continue to gradually improve, I think driven in large part by larger users looking to squeeze further cost out of the distribution systems as opposed to lot of expansion or new names, its definitely a cost motivated recovery, which has been good. I mean unlike office you don’t need to move it, you don’t move just for better image like you don’t care about that you move to reduce cost.

Activity we obviously had a strong 2012, we - I mean the industry DCT in particular, we had a great fourth quarter, we’ve -- good to see rent spreads turn positive, we’re actually positive on a cash basis for the second quarter in a row, GAAP rent spreads which are revolving on, because I think they measure effective rents and the average economics over term have been positive now for five quarters, same-store NOI fairly strong as well, so it’s we’re seeing the benefits of a slow gradual recovery, characterized by relatively low supply. So, we continue to chip away vacancy rates.

Excellent growth for us that shifted continued and try to find acquisitions, where we can mostly half market, mostly small, we were able to buy out a joint venture partner’s interest, I think very attractive economics, they didn’t have the (indiscernible) of the funds with cash to rebalance of some CMBS debt that was come in due and because of the CMBS debt is that someone are collecting portfolio that was cross collateralized and therefore you couldn’t get to the value without paying off the loan.

We paid down the loan, sold to the assets within strategy and it was four assets that we loved at rates that are far of, returns that are far above current market returns. And shifting more towards development, the development pipeline has been active, we began buying land in late 2010 early 2011 started construction in 2011. Those that early mover benefit was substantial, delivering assets in Miami, Washington DC, near Dallas, so in California, Houston at returns north of well a north of 8% in markets that are trading for stabilized assets that much closer to five. And those assets are least.

So its – when you go really its, in the markets recovering if things well, we’ll continue to focus on value add where we think it makes sense. I think it’s important that we apply our people and our skills not just our capital. I am not sure risk is under priced or cash flows over priced, but this clearly still a significant differential. Investors really want yield, they want stability, they want cash flow. We are a company that has the ability to deliver that, but created ourselves as opposed to buy from somebody else and that to me is the important opportunity that we have in fact the other public retail with a balance sheet and expertise to really create value through sourcing of opportunities, building in those - building and then leasing those successfully. You’re creating substantial value. Those spreads are as wide as I can remember them in a fairly long career. So, I could talk forever, you guys are already probably tired, I could put you to sleep quick too, so I’ll shut up and then turn over to Josh or anybody else that once they dig in with questions.

Unidentified Analyst

We’ll start off with one that we’re asking all the CEOs at the conference, what do you think is the most value creating opportunity within the company that the market today is overlooking or not fully appreciating?

Phil Hawkins - Chief Executive Officer

You know the danger going last is I get to read a bunch of those and everybody is having the same answer. So it’s intimidating like how can you say that’s original.

Unidentified Analyst

You had time to think about it.

Phil Hawkins - Chief Executive Officer

I have. My first smart-aleck answer is nothing people study with simple company and people studied a heck out of us, but I am not, I would say to me what a surprise investors positively and has what has helped us, I think our performance of stock has been conformational or you’ve been talking about for two years, actually been the case which is the recovery is broad-based not a gateway city recovery. I think the performance we’ve shown over time because finally I think, you will realize this is not just about selling California and Miami in the case of industrial it’s a broad based. Users want indeed non-coastal asset and demanding and rents are growing off the low base but they are growing. I think the other aspect that investors are beginning to appreciate is the transformation progress we’ve made over the last five years. We were underweighted towards a coast and we’re now I think its 40 again that number is right in front of me here.

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