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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to                
Commission file number 001-34603
Terreno Realty Corporation
(Exact Name of Registrant as Specified in Its Charter)
Maryland27-1262675
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
101 Montgomery Street, Suite 200
San Francisco, CA
94104
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (415655-4580
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol (s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per shareTRNONew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes      No  
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No  
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  



Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the closing price, as reported by the New York Stock Exchange, at which the common equity was last sold, as of June 30, 2020, the last business day of the Registrant’s most recently completed second fiscal quarter: $3,515,418,272. (For this computation, the Registrant has excluded the market value of all shares of its common stock reported as beneficially owned by executive officers and directors of the Registrant. Such exclusion shall not be deemed to constitute and admission that any such person is an affiliate of the Registrant).
The registrant had 68,646,910 shares of its common stock, $0.01 par value per share, outstanding as of February 8, 2021.
Documents Incorporated by Reference
Part III of this Annual Report on Form 10-K incorporates by reference portions of Terreno Realty Corporation’s Proxy Statement for its 2021 Annual Meeting of Stockholders, which the registrant anticipates will be filed with the Securities and Exchange Commission no later than 120 days after the end of its 2020 fiscal year pursuant to Regulation 14A.




Terreno Realty Corporation

Annual Report on Form 10-K
for the Year Ended December 31, 2020

Table of Contents
 
Part I:
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Part II:
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Part III:
Item 10
Item 11
Item 12
Item 13
Item 14
Part IV:
Item 15
Item 16




FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We caution investors that forward-looking statements are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “project”, “result”, “should”, “will”, “seek”, “target”, “see”, “likely”, “position”, “opportunity”, “outlook”, “potential”, “enthusiastic”, “future” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors, that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
 
the factors included in this Annual Report on Form 10-K, including those set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which you should interpret as being heightened as a result of the numerous and ongoing adverse impacts of the novel coronavirus ("COVID-19");
our ability to identify and acquire industrial properties on terms favorable to us;
general volatility of the capital markets and the market price of our common stock;
adverse economic or real estate conditions or developments in the industrial real estate sector and/or in the markets in which we acquire properties;
our dependence on key personnel and our reliance on third-party property managers;
our inability to comply with the laws, rules and regulations applicable to companies, and in particular, public companies;
our ability to manage our growth effectively;
tenant bankruptcies and defaults on, or non-renewal of, leases by tenants;
decreased rental rates or increased vacancy rates;
increased interest rates and operating costs;
the potential discontinuation of London Interbank Offered Rate (“LIBOR”);
declining real estate valuations and impairment charges;
our expected leverage, our failure to obtain necessary outside financing, and existing and future debt service obligations;
our ability to make distributions to our stockholders;
our failure to successfully hedge against interest rate increases;
our failure to successfully operate acquired properties;
risks relating to our real estate redevelopment, renovation and expansion strategies and activities;
the ongoing impact of COVID-19 on the U.S., regional and global economies and the business, financial condition and results of operations of our Company and our tenants;
our failure to qualify or maintain our status as a real estate investment trust (“REIT”), and possible adverse changes to tax laws;
1


uninsured or underinsured losses and costs relating to our properties or that otherwise result from future litigation;
environmental uncertainties and risks related to natural disasters;
financial market fluctuations; and
changes in real estate and zoning laws and increases in real property tax rates.


PART I


Item 1.     Business.
Overview
Terreno Realty Corporation (“Terreno”, and together with its subsidiaries, “we”, “us”, “our”, “our Company” or “the Company”) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. We invest in several types of industrial real estate, including warehouse/distribution (approximately 82.0% of our total annualized base rent as of December 31, 2020), flex (including light industrial and research and development, or R&D) (approximately 5.0%), transshipment (approximately 5.3%) and improved land (approximately 7.7%). 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. 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.
We are an internally managed Maryland corporation and elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Code, commencing with our taxable year ended December 31, 2010.
Our Investment Strategy
We acquire, own and operate industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.
As described in more detail below, we invest in several types of industrial real estate, including warehouse/distribution, flex (including light industrial and R&D), transshipment and improved land. 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.
Industrial Facility General Characteristics
Warehouse / distribution (approximately 82.0% of our total annualized base rent as of December 31, 2020)
 
Single and multiple tenant facilities that typically serve tenants greater than 10,000 square feet of space
Generally less than 20% office space
Typical clear height from 18 feet to 36 feet
May include production/manufacturing areas
Interior access via dock-high and/or grade-level doors
Truck court for large and small truck distribution options, possibly including staging for a high volume of truck activity and/or trailer storage
Flex (including light industrial and R&D, approximately 5.0% of our total annualized base rent as of
December 31, 2020)
 
Single and multiple tenant facilities that typically serve tenants less than 10,000 square feet of space
Facilities generally accommodate both office and warehouse/manufacturing activities
Typically has a larger amount of office space and shallower bay depths than warehouse/distribution facilities
Parking consistent with increased office use
2


Interior access via grade-level and/or dock-high doors
Staging for moderate truck activity
May include a showroom, service center, or assembly/light manufacturing component
Enhanced landscaping
Transshipment (approximately 5.3% of our total annualized base rent as of December 31, 2020)
 
Includes truck terminals and other transshipment facilities, which serve both single and multiple tenants
Typically has a high number of dock-high doors, shallow bay depth and lower clear height
Staging for a high volume of truck activity and trailer storage
Improved land (approximately 7.7% of our total annualized base rent as of December 31, 2020)
 
Used for industrial outdoor storage, including truck, trailer and car parking
May be redeveloped in the future

We selected our target markets by drawing upon the experience of our executive management investing and operating in over 50 global industrial markets located in North America, Europe and Asia, the fundamentals of supply and demand, and in anticipation of trends in logistics patterns resulting from population changes, regulatory and physical constraints, changes in technology, e-commerce, the economic and environmental benefits of reducing vehicle miles traveled and other factors. We believe that our target markets have attractive long-term investment attributes. We target assets with characteristics that include, but are not limited to, the following:
 
Located in high population coastal markets;
Close proximity to transportation infrastructure (such as sea ports, airports, highways and railways);
Situated in supply-constrained submarkets with barriers to new industrial development, as a result of physical and/or regulatory constraints;
Functional and flexible layout that can be modified to accommodate single and multiple tenants;
Acquisition price at a discount to the replacement cost of the property;
Potential for enhanced return through re-tenanting or operational or physical improvements; and
Opportunity for higher and better use of the property over time.
In general, we prefer to utilize local third-party property managers for day-to-day property management. We believe outsourcing property management is cost effective, provides us with operational flexibility and is a source of acquisition opportunities. We have directly managed certain of our properties in the past and may do so in the future if we determine such direct property management is in our best interest.
We have no current intention to acquire undeveloped or unimproved industrial land or to pursue greenfield ground-up development. Nevertheless, we pursue redevelopment, renovation and expansion opportunities of properties that we own, acquire properties and improved land parcels with the intent to redevelop in the near-term, and acquire adjacent land to expand our existing facilities.
We expect that we will continue to acquire the significant majority of our investments as equity interests in individual properties or portfolios of properties. We may acquire industrial properties through the acquisition of other corporations or entities that own industrial real estate. We will opportunistically make investments in debt secured by industrial real estate that would otherwise meet our investment criteria with the intention of ultimately acquiring the underlying real estate. We currently do not intend to target specific percentages of holdings of particular types of industrial properties. This expectation is based upon prevailing market conditions and may change over time in response to different prevailing market conditions.
The properties we acquire may be stabilized (fully leased) or unstabilized (have near term lease expirations or be partially or fully vacant). During the period from February 16, 2010 to December 31, 2020, we have stabilized 85 properties.
We sell properties from time to time when we believe the prospective total return from a property is particularly low relative to its market value or the market value of the property is significantly greater than its estimated replacement cost. Capital from such sales is reinvested into properties that are expected to provide better prospective returns or returned to shareholders. We have disposed of 23 properties since inception in 2010 for an aggregate sales price of approximately $364.7 million and a total gain of approximately $119.9 million.
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Competitive Strengths
We believe we distinguish ourselves from our competitors through the following competitive advantages:
 
Focused Investment Strategy. We invest exclusively in six major coastal U.S. markets and focus on infill locations. We selected our six target markets based upon the experience of our executive management investing and operating in over 50 global industrial markets located in North America, Europe and Asia, the fundamentals of supply and demand, and in anticipation of trends in logistics patterns resulting from population changes, regulatory and physical constraints, changes in technology, e-commerce, the economic and environmental benefits of reducing vehicle miles traveled and other factors. We have no current intention to acquire undeveloped or unimproved land or pursue greenfield ground-up development, but we pursue redevelopment, renovation and expansion activities.

Highly Aligned Compensation Structure. We believe that executive compensation should be closely aligned with long-term stockholder value creation. As a result, the long-term performance-based equity incentive compensation of our executive officers is based exclusively on our total shareholder return exceeding the total shareholder return of the MSCI U.S. REIT Index (RMS) or the FTSE National Association of Real Estate Investment Trusts (“Nareit”) Equity Industrial Index.

Commitment to Strong Corporate Governance. We are committed to strong corporate governance, as demonstrated by the following:
all members of our board of directors serve annual terms;
we have adopted a majority voting standard in non-contested director elections;
we have opted out of three Maryland anti-takeover provisions and, in the future, we may not opt back in to these provisions without stockholder approval;
we designed our ownership limits solely to protect our status as a REIT and not for the purpose of serving as an anti-takeover device; and
we have no stockholder rights plan. In the future, we will not adopt a stockholder rights plan unless our stockholders approve in advance the adoption of such a plan or, if adopted by our board of directors, we will submit the stockholder rights plan to our stockholders for a ratification vote within 12 months of adoption or the plan will terminate.
Our Financing Strategy
The primary objective of our financing strategy is to maintain financial flexibility with a conservative capital structure using retained cash flows, proceeds from dispositions of properties, long-term debt and the issuance of common and perpetual preferred stock to finance our growth. Over the long term, we intend to:
 
limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding perpetual preferred stock to less than 35% of our total enterprise value;
maintain a fixed charge coverage ratio in excess of 2.0x;
maintain a debt-to-adjusted EBITDA ratio below 6.0x;
limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness; and
have staggered debt maturities that are aligned to our expected average lease term (5-7 years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions.
We intend to preserve a flexible capital structure with a long-term goal to maintain our investment grade rating and be in a position to issue additional unsecured debt and additional perpetual preferred stock. Fitch Ratings assigned us an issuer rating of BBB with a stable outlook. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. There can be no assurance that we will be able to maintain our current credit rating. Our credit rating can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. In the event our current credit rating is downgraded, it may become difficult or expensive to obtain additional financing or refinance existing obligations and commitments. We intend to primarily utilize senior unsecured notes, term loans, credit facilities, dispositions of properties, common stock and perpetual preferred stock. We may also assume debt in connection with property acquisitions which may have a higher loan-to-value ratio.
Our Corporate Structure
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We are a Maryland corporation formed on November 6, 2009 and have been publicly held and subject to U.S. Securities and Exchange Commission ("SEC") reporting obligations since 2010. We are not structured as an Umbrella Partnership Real Estate Investment Trust, or UPREIT, although we could put in place a similar structure to facilitate an acquisition if needed. We currently own our properties indirectly through subsidiaries and may utilize one or more taxable REIT subsidiaries as appropriate.
Our Tax Status
We elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with our taxable year ended December 31, 2010. We believe that our organization and method of operation has enabled and will continue to enable us to meet the requirements for qualification and taxation as a REIT for federal income tax purposes. To maintain REIT status we must meet a number of organizational and operational requirements, including a requirement that we annually distribute at least 90% of our net taxable income to our stockholders, excluding net capital gains. As a REIT, we generally will not be subject to federal income tax on REIT taxable income we currently distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income or property and the income of our taxable REIT subsidiaries, if any, will be subject to taxation at regular corporate rates. We do not currently own any taxable REIT subsidiaries but may in the future.
Competition
We believe the current market for industrial real estate acquisitions to be highly competitive. We compete for real property investments with pension funds and their advisors, bank and insurance company investment accounts, other public and private real estate investment companies, including other REITs, real estate limited partnerships, owner-users, individuals and other entities engaged in real estate investment activities, some of which have greater financial resources than we do. We believe the leasing of real estate to be competitive. We experience competition for customers from owners and managers of competing properties. As a result, we may have to provide free rental periods, incur charges for tenant improvements or offer other inducements, all of which may have an adverse impact on our results of operations.
Governmental Regulations
Compliance with various governmental regulations has an impact on our business, including our capital expenditures, earnings and competitive position, which can be material. We incur costs to monitor and take actions to comply with governmental regulations that are applicable to our business, which include, among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage and other regulations relating to real property and the Americans with Disabilities Act of 1990.
In addition to the discussion below, see “Item 1A – Risk Factors” for a discussion of material risks to us, including, to the extent material, to our competitive position, relating to governmental regulations, and see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” together with our audited consolidated financial statements and the related notes thereto for a discussion of material information relevant to an assessment of our financial condition and results of operations, including, to the extent material, the effects that compliance with governmental regulations may have upon our capital expenditures and earnings.
Environmental Matters
The industrial properties that we own and will acquire are subject to various federal, state and local environmental laws. Under these laws, courts and government agencies have the authority to require us, as owner of a contaminated property, to clean up the property, even if we did not know of or were not responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated, and therefore it is possible we could incur these costs even after we sell some of our properties. In addition to the costs of cleanup, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow using the property as collateral or to sell the property. Under applicable environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator, pay for the clean up of that facility if it becomes contaminated and threatens human health or the environment.
Furthermore, various court decisions have established that third parties may recover damages for injury caused by property contamination. For instance, a person exposed to asbestos at one of our properties may seek to recover damages if he
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or she suffers injury from the asbestos. Lastly, some of these environmental laws restrict the use of a property or place conditions on various activities. An example would be laws that require a business using chemicals to manage them carefully and to notify local officials that the chemicals are being used.
We could be responsible for any of the costs discussed above. The costs to clean up a contaminated property, to defend against a claim, or to comply with environmental laws could be material and could adversely affect the funds available for distribution to our stockholders. We generally obtain “Phase I environmental site assessments”, or ESAs, on each property prior to acquiring it. However, these ESAs may not reveal all environmental costs that might have a material adverse effect on our business, assets, results of operations or liquidity and may not identify all potential environmental liabilities.
In general, we utilize local third-party property managers for day-to-day property management and will rely on these third parties to operate our industrial properties in compliance with applicable federal, state and local environmental laws in their daily operation of the respective properties and to promptly notify us of any environmental contaminations or similar issues. As a result, we may become subject to material environmental liabilities of which we are unaware. We can make no assurances that (1) future laws or regulations will not impose material environmental liabilities on us, or (2) the environmental condition of our industrial properties will not be affected by the condition of the properties in the vicinity of our industrial properties (such as the presence of leaking underground storage tanks) or by third parties unrelated to us. We were not aware of any significant or material exposures as of December 31, 2020 and 2019.
Employees and Human Capital
As of February 9, 2021, we had 26 employees. None of our employees is a member of any union or is subject to a collective bargaining agreement.
We recognize that our success is linked to the talent and expertise of our people. We invest in our employees and are committed to growing individual skills and leadership qualities across our business. Our human capital objectives include, as applicable, identifying, recruiting, retaining, developing, incentivizing and integrating our existing and prospective employees. We also emphasize external community engagement by encouraging volunteer work, providing paid time off to participate in charitable activities and matching a portion of employee donations to qualifying nonprofit organizations.
As an equal opportunity employer, we promote a consistent message of diversity and inclusion and reward our employees based on merit and their contributions. We have also increased our board diversity in terms of gender, race and work experience. We have designed an executive compensation program intended to (i) align the interest of our executives and stockholders, (ii) motivate our executives to manage our business to meet our near, medium and long-term objectives, (iii) assist in attracting and retaining talented and well-qualified executives, (iv) be competitive with other industrial real estate investment trusts and (v) encourage and provide the opportunity for our executives to obtain meaningful ownership levels of our stock.
The health and safety of our employees, third-party property managers, tenants and communities where our properties are located are of primary concern. Our employees are encouraged to make healthy lifestyle decisions that can ultimately benefit the company by reducing insurance claims and boosting productivity. We are headquartered in San Francisco and, in response to the COVID-19 pandemic, our employees have been working remotely in accordance with recommendations by the City of San Francisco since March 2020. Our local, third-party property managers are also generally working remotely, as recommended by their municipalities. Investors should refer to our COVID-19 disclosure in "Item 6 - Management's Discussion and Analysis of Financial Condition and Results of Operations".
Available Information
We maintain an internet website at the following address: http://terreno.com. The information on our website is neither part of nor incorporated by reference in this Annual Report on Form 10-K. We make available, free of charge, on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Exchange Act. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and exhibits and amendments to these reports, and Section 16 filings. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. You may also obtain our reports by accessing the EDGAR database at the SEC’s website at http://www.sec.gov.


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Item 1A.    Risk Factors.
Set forth below are the risks that we believe are material to our investors and they should be carefully considered. If any of the following risks occur, our business, financial condition, results of operations, cash flows and our ability to pay distributions on, and the per share trading price of, our common stock could be adversely affected. These risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. Investors should refer to the explanation of the qualifications and limitations on forward-looking statements beginning on page 2 and should also refer to our quarterly reports on Form 10-Q and current reports on Form 8-K for any material updates to these risk factors.

Risks Related to Our Business and Our Properties
The outbreak of the novel coronavirus (COVID-19) has caused, and could continue to cause, severe disruptions in the U.S., regional and global economies and could materially and adversely impact our business, financial condition and results of operations and the business, financial condition and results of operations of our tenants.
The global COVID-19 pandemic has caused, and could continue to cause, significant disruptions to the U.S. and global economies and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually and rapidly evolving and many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel and/or mandatory closures of businesses. Certain states and cities, including where our headquarters and our properties are located, have also reacted by instituting quarantines, restrictions on travel, “shelter-in-place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue.
The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted accurately, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, including the adoption of available COVID-19 vaccines, as well as the effect of any relaxation of current restrictions, all of which could vary among the geographic regions in which our properties are located, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of COVID-19 on our business and businesses of our tenants. Nevertheless, COVID-19 and actions taken to contain it or mitigate its impact may materially and adversely affect our businesses, financial condition and results of operations and may also have the effect of heightening many of the risks described below and within this “Risk Factors” section, including:
the complete or partial closure of, or other operational restrictions or other issues at, one or more of our properties resulting from government or tenant action has had, and could continue to have, a material adverse impact on our operations and those of our tenants and third-party property managers;
reduced economic activity impacting the businesses, financial condition and liquidity of our tenants, has caused, and could continue to cause, one or more of our tenants, including certain significant tenants, or one or more of our third-party managers, to be unable to meet their rent payment or other obligations to us in full, or at all, to otherwise seek modifications of such obligations, including rent payment deferrals, or to file for bankruptcy protection;
our inability to renew leases, lease vacant space, including vacant space from tenant defaults, or re-lease space as leases expire on favorable terms, or at all, including in the current slowing leasing environment, which could result in lower rental revenues or cause interruptions or delays in the receipt, or non-receipt, of rental payments;
severe disruption and instability in the U.S. and global financial markets or deteriorations in credit and financing conditions could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay debt on a timely basis;
disruptions in the supply of materials or products or the inability of contractors to perform on a timely basis, or at all, including as a result of restrictions on construction activity, could cause delays in completing ongoing or future construction or re-development projects;
any inability for us to effectively manage our portfolio and manage our operations or any inability of our third-party property managers to provide services to us while working remotely during the COVID-19 pandemic and for a time after such pandemic could adversely impact our business; and
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our potential inability to comply with financial covenants of our credit facility and other debt agreements could result in default and potential acceleration of indebtedness and impact our ability to make additional borrowings under our credit facility or other borrowings in the future.

Our long-term growth will depend, in part, upon future acquisitions of properties, and we may acquire properties that pose integration and other risks that could harm our business.

We intend to continue to acquire industrial properties in our six target markets. The acquisition of properties entails various risks, including the risks that our investments may not perform as well as we had expected, that we may be unable to quickly and efficiently integrate our new acquisitions into our existing operations and that our cost estimates for bringing an acquired property up to market standards may prove inaccurate. We may also own or acquire properties that are subject to contingent or pre-existing undisclosed liabilities including, but not limited to, liabilities for adverse environmental conditions, accrued but unpaid liabilities incurred in the ordinary course of business or tax liabilities. We may have no recourse, or only limited recourse, with respect to such unknown liabilities or may be unable to secure insurance coverage on the property in a sufficient amount of cover the liability, or at all. As a result, if a liability were asserted against us based upon ownership of any of these entities or properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flows. There is no assurance we would successfully overcome these risks or any other problems encountered with these acquisitions.

In addition, we cannot assure you of the availability of investment opportunities in our targeted markets at attractive pricing levels, or at all. As a result of competition in our targeted markets, we may be unable to acquire properties as we desire or the purchase price may be significantly elevated. In the event that such opportunities are not available in our targeted markets as we expect, our ability to execute our business plan and realize our projections for growth may be materially adversely affected.

The availability and timing of cash distributions is uncertain and is limited by the requirements of Maryland law.

We have made regular quarterly cash distributions (which we also refer to as dividends) to our stockholders, and we intend to continue to pay regular quarterly cash distributions. Our corporate strategy is to fund the payment of quarterly distributions entirely from distributable cash flows. However, our board of directors has the sole discretion to determine the timing, form and amount of any cash distributions and may fund our quarterly distributions from a combination of available cash flows, net of recurring capital expenditures and/or proceeds from borrowings and property dispositions or may retain any portion of our distributable cash flows for working capital. We cannot assure our stockholders that sufficient funds will be available to pay distributions or that the level of any distributions we do make will increase or even be maintained over time, any of which could materially and adversely affect the market price of our shares of common stock.

Our ability to pay distributions on our stock is also limited by applicable Maryland law, under which we generally may not make a distribution on our stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred stock then outstanding, if any, with preferences senior to those of our outstanding stock.

Our investments are concentrated in the industrial real estate sector, and our business would be adversely affected by an economic downturn in that sector.

Our investments in real estate assets are concentrated in the industrial real estate sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included a more significant portion of other sectors of the real estate industry.

Events or occurrences that affect areas in which our properties are located may materially adversely impact our financial results.

In addition to general regional, national and international economic conditions that may materially adversely affect our business and financial results, our operating performance will be materially adversely impacted by adverse economic conditions in the specific markets in which we operate and particularly in the markets in which we have significant concentrations of properties. For example, as of December 31, 2020, approximately 26.9% of our rentable square feet and approximately 53.2% of our improved land parcels were located in Northern New Jersey/New York City, representing a combined percentage of approximately 29.5% of our total annualized base rent. See “Item 2 - Properties” in this Annual Report on Form 10-K for
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additional information regarding our ownership of properties in our markets. Any downturn in the economy in the real estate market or any of our markets and any failure to accurately predict the timing of any economic improvement in these markets could cause our operations and our revenue and cash available for distribution to our stockholders to be materially adversely affected.

We may be unable to renew leases, lease vacant space, including vacant space resulting from tenant defaults, or re-lease space as leases expire.

We cannot assure you that leases at our properties will be renewed or that such properties will be re-leased at net effective rental rates equal to or above the then current average net effective rental rates, or at all. In addition, we may be required to grant concessions or fund improvements. If the rental rates for our properties decrease, our tenants do not renew their leases or we do not re-lease a significant portion of our available space, including vacant space resulting from tenant defaults, and space for which leases are scheduled to expire, our financial condition, results of operations, cash flows, cash available for distribution to stockholders, per share trading price of our common stock and our ability to satisfy our debt service obligations could be materially adversely affected. In addition, if we are unable to renew leases or re-lease a property, the resale value of that property could be diminished because the market value of a particular property will depend in part upon the value of the leases of such property.

We may be required to fund future tenant improvements, and we may not have funding for those improvements.

When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings in the future, it is likely that, in order to attract one or more new tenants, we will be required to expend funds to construct new tenant improvements in the vacated space. We may also be required to fund tenant improvements to retain tenants. Although we intend to manage our cash position or financing availability to pay for any improvements required for re-leasing, we cannot assure our stockholders that we will have adequate sources of funding available to us for such purposes in the future.

We face potential adverse effects from the bankruptcies or insolvencies of tenants or from tenant defaults generally.

We are dependent on tenants for our revenues, including certain significant tenants and single tenants that occupy entire properties. As a result, the bankruptcy or insolvency of our tenants, or tenant defaults generally, may adversely affect the income produced by our properties. In the event of a tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs, including litigation and related expenses, in protecting our investment and re-leasing our property.

Our tenants, particularly those that are highly leveraged, could file for bankruptcy protection or become insolvent in the future. Under bankruptcy law, a tenant cannot be evicted solely because of its bankruptcy but the bankrupt tenant may be authorized to reject and terminate its lease with us. In such case, our claim against the bankrupt tenant for unpaid and future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and, even so, our claim for unpaid rent would likely not be paid in full. This shortfall could force us to find an alternative source of revenues to pay any mortgage loan or operating expenses on the property, adversely affect our cash flows and results of operations and could cause us to reduce the amount of distributions to stockholders.

Declining real estate valuations and impairment charges could adversely affect our earnings and financial condition.

We review the carrying value of our properties when circumstances, such as adverse market conditions, indicate potential impairment may exist. We base our review on an estimate of the future cash flows (excluding interest charges) expected to result from the real estate investment’s use and eventual disposition. We consider factors such as future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If our evaluation indicates that we may be unable to recover the carrying value of a real estate investment, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property. These losses would have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. A worsening real estate market may cause us to reevaluate the assumptions used in our impairment analysis. Impairment charges could adversely affect our financial condition, results of operations, cash available for distribution, including cash available for us to pay distributions to our stockholders and per share trading price of our common stock.

We utilize local third-party managers for day-to-day property management for substantially all of our properties.

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In general, we prefer to utilize local third-party managers for day-to-day property management, although we may directly manage other properties in the future. To the extent we utilize third-party managers, our cash flows from our industrial properties may be adversely affected if our managers fail to provide quality services. In addition, our managers or their affiliates may manage, and in some cases may own, invest in or provide credit support or operating guarantees to industrial properties that compete with our industrial properties, which may result in conflicts of interest and decisions regarding the operation of our industrial properties that are not in our best interests.

Our redevelopment, renovation or expansion strategies may not be successful.

We may pursue redevelopment opportunities or construct expansions or improvements of industrial properties that we own. These activities are subject to risks, including, but not limited to, the risks that: we will expend money and time on projects that do not perform as expected; the actual construction or operating costs, including labor and material costs, will be higher than originally estimated; we may fail to obtain, or experience delays in obtaining, any necessary permits and authorizations; permits and authorizations are subject to stringent conditions; we are unable to complete construction on the timeframe we expect, or at all; occupancy and rental rates may not meet expectations; and we may be unable to obtain financing on favorable terms, or at all, for such projects.

We may not acquire the industrial properties that we have entered into agreements or non-binding letters of intent to acquire.

We have entered, and may in the future enter, into agreements and non-binding letters of intent with third-party sellers to acquire properties as more fully described under the heading “Contractual Obligations” in this Annual Report on Form 10-K. There is no assurance that we will acquire the properties under contract and non-binding letters of intent because the proposed acquisitions are subject to the completion of satisfactory due diligence and various closing conditions, and in the case of properties under non-binding letters of intent, our entry into purchase and sale agreements with respect to the properties. There is no assurance that such proposed acquisitions, if completed, will be completed on the timeframe or terms we expect. If we do not complete the acquisition of the properties under contract or non-binding letters of intent, we will have incurred expenses without our stockholders realizing any benefit from the acquisition of such properties.

We depend on key personnel.

Our success depends to a significant degree upon the contributions of our senior management team whose continued service is not guaranteed. The loss of services from our senior management team or our inability to find suitable replacements, could adversely impact our financial condition and cash flows. Further, such a loss could be negatively perceived in the capital markets.

We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.

Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants. We face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, people with access or who gain access to our systems and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Although we make efforts to maintain the security and integrity of our IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, including but not limited to password protection, ongoing training modules throughout the year, frequent backups and a redundant data system, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our IT networks and related systems could significantly disrupt the proper functioning of our networks and systems and, as a result, disrupt our operations, which could have a material adverse effect on our cash flow, financial condition and results of operations.

We may from time to time be subject to litigation that may negatively impact our cash flow, financial condition, results of operations and market price of our common stock.

We may from time to time be a defendant in lawsuits and regulatory proceedings relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such
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litigation or proceedings. An unfavorable outcome could negatively impact our cash flow, financial condition, results of operations and trading price of our common stock.

Risks Related to Financing and Capital

If we cannot obtain additional financing, our growth will be limited.

If adverse conditions in the credit markets, in particular with respect to real estate, materially deteriorate, our business could be materially and adversely affected. Our long-term ability to grow through investments in industrial properties, including our ability to realize our projections for growth, will be limited if we cannot obtain additional financing on favorable terms, or at all. In the future, we will rely on equity and debt financing, including issuances of common and perpetual preferred stock, borrowings under our revolving credit facility, term loans, issuances of unsecured debt securities and debt secured by individual properties or pools of properties, to finance our acquisition, redevelopment, renovation and expansion activities and for working capital. If we are unable to obtain equity or debt financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. Market conditions may make it difficult to obtain additional financing, and we cannot assure you that we will be able to obtain additional debt or equity financing or that we will be able to obtain it on favorable terms.

In addition, to qualify as a REIT, we are required to distribute at least 90% of our taxable income (determined before the deduction for dividends paid and excluding any net capital gains) each year to our stockholders, and we generally expect to make distributions in excess of such amount. As a result, our ability to retain earnings to fund acquisitions, redevelopment, renovation and expansion, if any, or other capital expenditures will be limited.

Debt service obligations could adversely affect our overall operating results, may require us to sell industrial properties and could adversely affect our ability to make distributions to our stockholders and the market price of our shares of common stock.

Our business strategy contemplates the use of both non-recourse secured debt and unsecured debt to finance long-term growth. As of December 31, 2020, we had total debt, net of deferred financing costs, of approximately $459.1 million, which consisted of revolving credit facility borrowings, term loan borrowings, senior unsecured note borrowings and mortgage loans payable. While over the long term we intend to limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding shares of preferred stock to less than 35% of our total enterprise value, our governing documents contain no limitations on the amount of debt that we may incur, and our board of directors may change our financing policy at any time without stockholder approval. We also intend to maintain a fixed charge coverage ratio in excess of 2.0x and a debt-to-adjusted EBITDA ratio below 6.0x and limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness but our board of directors may modify or eliminate these limitations at any time without the approval of our stockholders. As a result, we may be able to incur substantial additional debt, including secured debt, in the future. Our existing debt, and the incurrence of additional debt, could subject us to many risks, including the risks that:
our cash flows from operations will be insufficient to make required payments of principal and interest;
our debt may increase our vulnerability to adverse economic and industry conditions;
we may be required to dedicate a substantial portion of our cash flows from operations to payments on our debt, thereby reducing cash available for distribution to our stockholders, funds available for operations and capital expenditures, future business opportunities or other purposes;
the terms of any refinancing may not be as favorable as the terms of the debt being refinanced; and
the use of leverage could adversely affect our ability to make distributions to our stockholders and the market price of our shares of common stock.

If we do not have sufficient funds to repay existing or future debt, including debt under our credit facility and senior unsecured notes, it may be necessary to refinance the debt through additional debt or additional equity financings. If, at the time of any refinancing, prevailing interest rates or other factors result in higher interest rates on refinancings, the increase in interest expense would adversely affect our cash flows, and, consequently, cash available for distribution to our stockholders. If we are unable to refinance our debt on acceptable terms, we may be forced to dispose of industrial properties on disadvantageous terms, potentially resulting in losses. We may also place mortgages on our properties that we own to secure a revolving credit facility or other debt. To the extent we cannot meet any future debt service obligations, we will risk losing some or all of our industrial properties that may be pledged to secure our obligations to foreclosure.

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Higher interest rates could increase debt service requirements on any floating rate debt that we incur and could reduce the amounts available for distribution to our stockholders, as well as reduce funds available for our operations, future business opportunities, or other purposes. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. Adverse economic conditions could cause the terms on which we borrow to be unfavorable. We could be required to liquidate one or more of our industrial properties in order to meet our debt service obligations at times which may not permit us to receive an attractive return on our investments.

The agreements relating to our existing debt contain, and we expect that agreements relating to our future indebtedness will contain, covenants that could limit our operations and our ability to make distributions to our stockholders.

We have a credit facility, which consists of a $100.0 million term loan that matures in January 2022 and a revolving credit facility with $250.0 million in borrowing capacity that matures in October 2022. We also have $350.0 million of senior unsecured notes outstanding. We have agreed to guarantee the obligations of the borrower (a wholly-owned subsidiary) under our revolving credit facility, our term loan and our senior unsecured notes. Our revolving credit facility, our term loan, our senior unsecured notes and certain of our existing mortgage loans payable contain, and we expect that our future indebtedness will contain, financial and operating covenants, such as fixed charge coverage and debt ratios and other limitations that will limit or restrict our ability to make distributions or other payments to our stockholders and may restrict our investment activities. For example, our credit facility restricts distributions if we are in default. These covenants may limit our operating and financial flexibility and our ability to respond to changes in our business or competitive activities in the future and may also restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our stockholders or obtain necessary funds.

Failure to meet our financial covenants could result from, among other things, changes in our results of operations, the incurrence of additional debt or changes in general economic conditions. If we violate covenants or if there is an event of default under our credit facility, our senior unsecured notes, our existing mortgage loans payable or in our future agreements, we could be required to repay all or a portion of our indebtedness before maturity and might be unable to arrange financing for such repayment on attractive terms, if at all. In addition, the note purchase agreements with respect to our existing senior unsecured notes contain, and any unsecured debt agreements we enter into in the future may contain, specific cross-default provisions with respect to specified other indebtedness, giving the unsecured lenders the right to declare a default if we are in default under other loans in some circumstances. Defaults under our debt agreements could materially and adversely affect our cash flows, financial condition and results of operations.

We may acquire outstanding debt or provide a loan, in each case secured by an industrial property, which will expose us to risks.

We may acquire outstanding debt secured by an industrial property from lenders and investors or provide a loan secured by industrial property if we believe we can acquire ownership of the underlying property through foreclosure, deed-in-lieu of foreclosure or other means. If we acquire such debt or provide such a loan, borrowers may seek to assert various defenses to our foreclosure or other actions, and we may not be successful in acquiring the underlying property on a timely basis, or at all, in which event we could incur significant costs and experience significant delays in acquiring such properties, all of which could adversely affect our financial performance and reduce our expected returns from such investments. In addition, we may not earn a current return on such investments particularly if the loan that we acquire or provide is in, or goes into, default.

If we provide debtor-in-possession financing or provide a loan, a default by the borrower could adversely affect our cash flows.

We may on a limited basis provide debtor-in-possession financing to a property owner that has filed for bankruptcy or make a loan secured by real estate that we might otherwise purchase directly. We expect that any such loans would be secured by one or more properties that we intend to acquire and that we would have the option to acquire such property in lieu of the repayment of such loan. Any default by the borrower under any such loan could negatively impact our cash flows and our ability to make cash distributions to our stockholders and result in litigation and related expenses. Although we would expect to acquire the secured property upon a borrower’s default, there is no assurance that we will successfully foreclose on a property, and any such foreclosure could result in significant expenses.

Adverse changes in our credit rating could negatively affect our financing activity.

Fitch Ratings assigned us an issuer rating of BBB with a stable outlook. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Our credit rating
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can affect the amount of capital we can access, as well as the terms and pricing of any debt we may incur. There can be no assurance that we will be able to maintain our current credit rating, and in the event our credit rating is downgraded, we would likely incur higher borrowing costs and may encounter difficulty in obtaining additional financing. Also, a downgrade in our credit rating may trigger additional payments or other negative consequences under our existing and future credit facilities and debt instruments. For example, if our credit rating is downgraded to below investment grade levels, we may not be able to obtain or maintain extensions on certain of our existing debt. Adverse changes in our credit rating could negatively impact our refinancing activities, our ability to manage our debt maturities, our future growth, our financial condition, the market price of our stock and our acquisition activities.

Failure to hedge effectively against interest rate changes may adversely affect results of operations.

We may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as cap contracts and swap agreements. For example, as of December 31, 2020, we have one interest rate cap to hedge the variable cash flows associated with $50.0 million of our $100.0 million variable-rate term loan. This arrangement, and future hedging arrangements we enter into, may not be effective in reducing our exposure to interest rate changes and a court could rule that such arrangements are not legally enforceable. Hedging may reduce overall returns on our investments and the failure to hedge effectively against interest rate changes may materially adversely affect our results of operations.

We may be adversely affected by the potential discontinuation of LIBOR.

In July 2017, the Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. It is expected that a transition away from the widespread use of LIBOR to alternative interest rates will occur over the course of the next few years. As of December 31, 2020, we had $100.0 million of debt that was indexed to LIBOR, including our credit facility.

In the event that LIBOR is discontinued, the interest rate for our debt that is indexed to LIBOR will be based on a replacement rate or an alternate base rate as specified in the applicable documentation governing such debt or as otherwise agreed upon. Such an event would not affect our ability to borrow or maintain already outstanding borrowings, but the replacement rate or alternate base rate could be higher or more volatile than LIBOR prior to its discontinuance. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form. While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and may be magnified.

Our existing stockholders may experience dilution if we issue additional common stock.

Sales of substantial amounts of shares of our common stock in the public market, including the issuance of our common stock in connection with property, portfolio or business acquisitions, the issuance and vesting of any restricted stock granted to employees under our 2019 Equity Incentive Plan and the issuance of our common stock upon the vesting of awards under our Amended and Restated Long-Term Incentive Plan, may be dilutive to existing stockholders and could have an adverse effect on the market price of our common stock.

We may issue preferred stock or debt securities and may also incur other future indebtedness which would rank senior to our common stock upon liquidation and may adversely affect the market price of our common stock.

Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Upon liquidation, holders of our debt securities and any shares of preferred stock, and lenders with respect to other borrowings, including our existing credit facility and mortgage loans payable, will receive distributions of our available assets prior to the holders of our common stock. In addition, future offerings of debt securities or the incurrence of additional indebtedness may reduce the market price of our common stock. Shares of our preferred stock, if issued in the future, could have a preference on liquidating distributions and a preference on dividend payments that could limit our ability to pay a dividend or make another distribution to the holders of our common stock and, as a result, may reduce the market price of our common stock.

Volatility in the capital and credit markets could materially and adversely impact us.

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The capital and credit markets have experienced, and may continue to experience, extreme volatility and disruption from time to time, which may make it more difficult for us to raise equity capital, hinder our ability to borrow money, obtain new debt financing or refinance our maturing debt on favorable terms, or at all. Market turmoil and tightening of credit, which have occurred in the past, can also lead to an increased lack of consumer confidence and widespread reduction of business activity generally, which also could materially and adversely impact us, including our ability to acquire and dispose of assets on favorable terms or at all. Volatility in capital and credit markets may also have a material adverse effect on the market price of our common stock.

Risks Related to the Real Estate Industry

Investments in real estate properties are subject to risks that could adversely affect our business.

Investments in real estate properties are subject to varying degrees of risk and our performance and value are subject to general economic conditions and risks associated with our properties. While we seek to minimize these risks through geographic diversification of our portfolio, market research and our asset management capabilities, these risks cannot be eliminated. Factors that may affect real estate values and cash flows include:
downturns in national, regional and local economic conditions (particularly increases in unemployment);
the attractiveness of our properties to potential tenants and competition from other industrial properties;
changes in supply of, or demand for, similar or competing properties in an area;
bankruptcies, financial difficulties or lease defaults by the tenants of our properties;
adverse capital and credit market conditions, which may restrict our operating activities;
changes in interest rates, availability and terms of debt financing, including periods of high or rising interest rates;
changes in operating costs and expenses and our ability to control rents;
changes in, or increased costs of compliance with, governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder;
increasing costs of maintaining, insuring, renovating and making improvements to our properties;
unanticipated changes in costs associated with known adverse environmental conditions or retained liabilities for such conditions;
tenant turnover;
re-leasing that may require concessions or reduced rental rates under the new leases due to reduced demand;
our ability to renovate and reposition our properties due to changes in the business and logistical needs of our tenants;
technological changes, such as reconfiguration of supply chains, autonomous vehicles, robotics, 3D printing or other technologies;
disruptions in the global supply chain caused by political, regulatory or other factors, including terrorism and domestic terrorist attacks;
disruptions to political, governmental or regulatory systems, including shutdowns of the government and its agencies; and,
the effects of deflation, including credit market dislocation, weakened consumer demand and a decline in general price levels.

In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would materially adversely affect our financial condition and results of operations. Future terrorist attacks may also result in declining economic activity, which could reduce the demand for, and the value of, our properties and adversely impact our tenants, including their ability to meet obligations under their leases. For these and other reasons, we cannot assure our stockholders that we will be profitable or that we will realize growth in the value of our properties.

Actions by our competitors may decrease or prevent increases in the occupancy and rental rates of our properties.

We compete with other developers, owners and operators of real estate, some of which own properties similar to our properties in the same markets in which the properties we own are located. If our competitors offer space at rental rates below current market rates or below the rental rates we will charge the tenants of our properties, we may lose existing or potential tenants, and we may be pressured to reduce our rental rates or offer tenant concessions or favorable lease terms in order to retain tenants when such tenants’ leases expire or attract new tenants. As a result of these actions by our competitors, our
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financial condition, cash flows, cash available for distribution, trading price of our common stock and ability to satisfy our debt service obligations could be materially adversely affected.

Real estate investments are not as liquid as other types of assets, which may reduce economic returns to investors.

Real estate investments are not as liquid as other types of investments and significant expenditures associated with real estate investments, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investments. In addition, we intend to comply with the safe harbor rules relating to the number of properties that can be disposed of in a year, the tax bases and the costs of improvements made to these properties, and meet other tests which enable a REIT to avoid punitive taxation on the sale of assets. Thus, our ability at any time to sell assets may be restricted. This lack of liquidity may limit our ability to vary our portfolio promptly in response to changes in economic, financial, investment or other conditions and, as a result, could adversely affect our financial condition, results of operations, cash flows and our ability to pay distributions on, and the market price of, our common stock.

Uninsured or underinsured losses relating to real property may adversely affect our returns.

We will attempt to ensure that all of our properties are adequately insured to cover casualty losses. However, there are certain losses, including losses from floods, hurricanes, fires, earthquakes and other natural disasters, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so. In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses. Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed property and we may not have access to an alternative source of funding to repair or reconstruct the damaged property. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenues in these properties and could potentially remain obligated under any recourse debt associated with the property. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate a property after it has been damaged or destroyed. Any such losses could adversely affect our financial condition, results of operations, cash flows and ability to pay distributions on, and the market price of, our common stock.

We own properties in Los Angeles, the San Francisco Bay Area and Seattle, which are located in areas that are known to be subject to earthquake activity. Although we carry replacement-cost earthquake insurance on all of our properties located in areas historically subject to seismic activity, subject to coverage limitations and deductibles that we believe are commercially reasonable, we may not be able to obtain coverage to cover all losses with respect to such properties on economically favorable terms, which could expose us to uninsured casualty losses. We intend to evaluate our earthquake insurance coverage annually in light of current industry practice.

Environmentally hazardous conditions may adversely affect our operating results.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of investigating, removing or remediating hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Even if more than one person may have been responsible for the contamination, each person covered by applicable environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages based on personal injury, natural resource or property damage or other costs, including investigation and clean-up costs, resulting from the environmental contamination. The presence of hazardous or toxic substances on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to sell or lease the property or borrow using the property as collateral. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated. A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, we may be exposed to such costs. The cost of defending against environmental claims, of compliance with environmental regulatory requirements or of remediating any contaminated property could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our stockholders.

Environmental laws in the U.S. also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators who fail to comply with these
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requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our properties may contain asbestos-containing building materials.

We invest in properties historically used for industrial, manufacturing and commercial purposes. Some of these properties contain, or may have contained, underground storage tanks for the storage of petroleum products and other hazardous or toxic substances. All of these operations create a potential for the release of petroleum products or other hazardous or toxic substances. Some of our properties may be adjacent to or near other properties that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. In addition, certain of our properties may be on or are adjacent to or near other properties upon which others, including former owners or tenants of such properties, have engaged, or may in the future engage, in activities that may release petroleum products or other hazardous or toxic substances. As needed, we may obtain environmental insurance policies on commercially reasonable terms that provide coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations. From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a superior risk- adjusted return. In such an instance, we underwrite the costs of environmental investigation, clean-up and monitoring into the cost. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.

We generally obtain Phase I environmental site assessments on each property prior to acquiring it and we generally anticipate that the properties that we may acquire in the future may be subject to a Phase I or similar environmental assessment by independent environmental consultants at the time of acquisition. Phase I assessments are intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties. Phase I assessments generally include a historical review, a public records review, an investigation of the surveyed site and surrounding properties, and preparation and issuance of a written report, but do not include soil sampling or subsurface investigations and typically do not include an asbestos survey. Even if none of our environmental assessments of our properties reveal an environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations taken as a whole, we cannot give any assurance that such conditions do not exist or may not arise in the future. Material environmental conditions, liabilities or compliance concerns may go undetected by the environmental assessment or arise after the environmental assessment has been completed. Moreover, there can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the environmental condition of our properties will not be affected by tenants, by the condition of land or operations in the vicinity of such properties (such as releases from underground storage tanks), or by third parties unrelated to us.

Costs of complying with governmental laws and regulations with respect to our properties may adversely affect our income and the cash available for any distributions.

All real property and the operations conducted on real property are subject to various federal, state and local laws and regulations. Tenants’ ability to operate and to generate income to pay their lease obligations may be affected by permitting and compliance obligations arising under such laws and regulations. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. Leasing our properties to tenants that engage in industrial, manufacturing and commercial activities will cause us to be subject to the risk of liabilities under environmental laws and regulations.

Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages for noncompliance. Any material expenditures, fines or damages we must pay will reduce our ability to make distributions and may reduce the value of our common stock. In addition, changes in these laws and governmental regulations, or their interpretation by agencies or the courts, could occur.

Furthermore, while leases with our tenants generally include provisions to obligate the tenants to comply with all laws and operate within a defined use, there is no guaranty that the tenants will comply with the terms of their leases. Moreover, our tenants may disregard the use restrictions contained in their leases and conduct operations not contemplated by the lease, including highly hazardous uses, despite our efforts to prohibit certain uses. We may also incur costs to bring a property into legal compliance even though the tenant may have been contractually required to comply and pay for the cost of compliance.

We are exposed to the potential impacts of future climate change and climate-change related risks, which may result in unanticipated losses that could affect our business and financial condition.
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Government authorities and various interest groups are promoting laws and regulations that could limit greenhouse gas, or GHG, emissions due to concerns over contributions to climate change. Laws and regulations targeting climate change or GHG emissions, including any additional taxation or regulation of energy use, could result in increased operating costs that we may not be able to effectively pass on to our tenants. In addition, such laws and regulations could impose substantial costs on our tenants, including, for example, an increase in the cost of the fuel and other energy purchased by our tenants and capital costs associated with updating or replacing their trucks earlier than planned. Any such increased costs could impact the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties.

We may be exposed to physical risks from possible future changes in climate. Our properties may be exposed to rare catastrophic weather events, such as severe storms or floods. If the frequency of extreme weather events increases, our exposure to these events could increase. Some of our properties may be subject to risks from rising sea levels. In addition, many state and local governments are adopting or considering adopting regulations requiring that property owners and developers include in their development or redevelopment plans resiliency measures to address climate-change related risks. If such regulations apply to any of our properties, we may be required to incur substantial costs to address such regulations.

Compliance or failure to comply with regulatory requirements could result in substantial costs.

We are required to comply with many regulations made by various regulatory entities, including (but not limited to) the Americans with Disabilities Act, The Fair Housing Amendment of 1988, various California energy efficiency standards such as The Energy Efficiency Standards for Residential and Nonresidential Buildings, Title 24, and/or other similar regulations. Noncompliance could result in the imposition of fines or the award of damages to private litigants. If we are required to incur additional costs and make unanticipated expenditures or substantial modifications to our properties to comply with such regulatory requirements, our financial condition, cash flows, results of operations, the market price of our shares of common stock and our ability to make distributions to our stockholders could be adversely affected.

We may be unable to sell a property if or when we decide to do so, including as a result of uncertain market conditions, which could adversely affect the return on an investment in our common stock.

We expect to hold the various real properties in which we invest until such time as we decide that a sale or other disposition is appropriate given our investment objectives. Our ability to dispose of properties on advantageous terms or at all depends on factors beyond our control, including competition from other sellers that are divesting similar assets in the same markets and/or at valuations below our valuations for comparable assets and the availability of attractive financing for potential buyers of our properties. Due to the uncertainty of market conditions which may affect the future disposition of our properties, we cannot assure our stockholders that we will be able to sell such properties at a profit, or at all, in the future.

Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold and may not have the funds available to correct such defects or to make such improvements. In acquiring a property, we may agree to restrictions that prohibit the sale of that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These provisions would restrict our ability to sell a property.

Risks Related to Our Organizational Structure

Our board of directors may change significant corporate policies without stockholder approval.

Our investment, financing, borrowing and distribution policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, are determined by our board of directors. These policies may be amended or revised at any time and from time to time at the discretion of the board of directors without notice to, or a vote of, our stockholders. In addition, the board of directors may change our governance policies, including our conflict of interest policies, provided that such changes are consistent with applicable legal and regulatory requirements, including the listing standards of the New York Stock Exchange. A change in these policies could have an adverse effect on our financial condition, results of operations, cash flows, per share trading price of our common stock and ability to satisfy our debt service obligations and to pay distributions to our stockholders.

We could increase the number of authorized shares of stock and issue stock without stockholder approval.

Subject to applicable legal and regulatory requirements, our charter authorizes our board of directors, without stockholder approval, to increase the aggregate number of authorized shares of stock or the number of authorized shares of stock of any
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class or series, to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock and to set the preferences, rights and other terms of such classified or unclassified shares. Our board of directors could establish a series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting or deterring a third-party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:
Business Combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (as defined under the MGCL) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose special stockholder voting requirements unless certain minimum price conditions are satisfied; and

Control Share” provisions that provide that “control shares” of our company acquired in a “control share acquisition” (each as defined under the MGCL) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

We have opted out of the business combination and control share provisions of the MGCL by resolution of our board of directors and pursuant to a provision in our bylaws, respectively. However, in the future, only upon the approval of our stockholders, our board of directors may by resolution elect to opt-in to the business combination provisions of the MGCL and we may, only upon the approval of our stockholders, by amendment to our bylaws, opt-in to the control share provisions of the MGCL. Our board of directors has also adopted a resolution prohibiting us from electing to be subject to the provisions of Title 3, Subtitle 8 of the MGCL, without the approval of our stockholders, that would permit our board of directors to classify the board without stockholder approval. Such provisions of Title 3, Subtitle 8 of the MGCL could have an anti-takeover effect.

In addition, the provisions of our charter on removal of directors and the advance notice provisions of our bylaws could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interest. Likewise, if our board of directors, with stockholder approval, as applicable, were to opt- in to the business combination or control share provisions of the MGCL or the provisions of Title 3, Subtitle 8 of the MGCL, these provisions of the MGCL could have similar anti-takeover effects.

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

Maryland law provides that a director or officer has no liability in that capacity if he or she satisfies his or her duties to us and our stockholders. Our charter limits the liability of our directors and officers to us and our stockholders for monetary damages, except for liability resulting from:
actual receipt of an improper benefit or profit in money, property or services; or
a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.

In addition, our charter authorizes us, and our bylaws require us, to indemnify our directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. Accordingly, in the event that actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director or officer will be limited. In addition, we may be obligated to advance the defense costs incurred by our directors and executive officers, and may, in the discretion of our board of directors, advance the defense costs incurred by our employees and other agents in connection with legal proceedings.

Risks Related to Our Status as a REIT

Failure to qualify as a REIT would cause us to be taxed as a regular C corporation, which would substantially reduce funds available for distributions to stockholders.

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We believe that our organization and method of operation has enabled and will continue to enable us to meet the requirements for qualification and taxation as a REIT. However, we cannot assure you that we will qualify as such. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification.

If we fail to qualify as a REIT in any taxable year, and are unable to obtain relief under certain statutory provisions, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:
we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to federal and state income tax at regular corporate rates; and
we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.

In addition, we would no longer be required to pay distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. Our tax liabilities may increase as a result of changes in state and local tax laws or regulations, or, in the case of property taxes, as our properties are assessed or reassessed by taxing authorities. Any of these taxes would decrease cash available for distributions to stockholders.

We may be subject to a 100% penalty tax on any prohibited transactions that we enter into, or may be required to forego certain otherwise beneficial opportunities in order to avoid the penalty tax on prohibited transactions.

If we are found to have acquired or held property primarily for sale to customers in the ordinary course of business, we may be subject to a 100% prohibited transactions tax under U.S. federal tax laws on the gain from disposition of the property unless the disposition qualifies for one or more safe harbor exceptions for properties that have been held by us for at least two years and satisfy certain additional requirements.

The potential application of the prohibited transactions tax could cause us to forego potential dispositions of property or to forego other opportunities that might otherwise be attractive to us, or to hold investments or undertake such dispositions or other opportunities through a taxable REIT subsidiary (“TRS”), which would generally result in corporate income taxes being incurred.

REIT distribution requirements could adversely affect our liquidity and may force us to borrow funds or sell assets during unfavorable market conditions.

In order to maintain our REIT status and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding capital gains. In addition, we will be subject to corporate income tax to the extent we distribute less than 100% of our net taxable income including any net capital gain. We intend to make distributions to our stockholders to comply with the requirements of the Code for REITs and to minimize or eliminate our corporate income tax obligation to the extent consistent with our business objectives. Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments. The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

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Dividends payable by REITs generally do not qualify for reduced tax rates.

Currently, the maximum tax rate for qualified dividends payable to individual U.S. stockholders is 20%. Dividends payable by REITs, however, are generally not eligible for such reduced rates. However, for taxable years beginning before January 1, 2026, a deduction of up to 20% (subject to certain limitations) is available on most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers. Additionally, to the extent such dividends are attributable to certain dividends that we receive from a TRS, such dividends generally will be eligible for the reduced rates that apply to qualified dividend income. While we currently do not own any interest in a TRS, we may own any such interest in the future. The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

We may choose to pay dividends in our stock instead of cash, in which case stockholders may be required to pay income taxes in excess of any cash dividends they receive.

We may distribute taxable dividends that are payable in stock. Taxable stockholders receiving taxable stock dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of any cash dividends received. If a U.S. stockholder sells the stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to such dividends. In addition, if a significant number of our stockholders sell common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common stock.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or to liquidate otherwise attractive investments.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investments in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the total voting power of the outstanding securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by unsecured debt of publicly offered REITs, in each case, at the close of each calendar quarter. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Our relationship with any TRS will be limited, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the imposition of certain taxes.

While we currently do not own any interest in a TRS, we may own any such interest in the future. As a REIT, we are subject to a variety of limitations on our ownership of TRSs and operations with respect to any TRSs that we own, and failure to comply with these limitations may subject us to additional taxes, the amount of which could be substantial, or, potentially, loss of REIT status. While we anticipate that we will comply with these limitations in the event we acquire an interest in a TRS, we can provide no assurances in this regard.

The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to federal income tax and reduce distributions to our stockholders.

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Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to be qualified as a REIT. If we cease to be a REIT, we would become subject to federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.

We may face risks in connection with Section 1031 Exchanges.

We may engage in one or more real estate transactions intended to qualify for federal income tax deferral as a “like-kind exchange” under Section 1031 of the Code. If a transaction that is intended to qualify for deferral under Section 1031 is later determined to have been taxable, we may face adverse consequences. Additionally, if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock.

At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new federal income tax law, regulation, or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.

General Risks

Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal controls over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal controls over financial reporting may not prevent all errors, misstatements or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, there can be no guarantee that our internal controls over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal controls over financial reporting which may occur in the future could result in misstatements or restatements of our financial statements or a decline in our stock price.

The market price and trading volume of our common stock may be volatile and may trade at prices that are higher or lower than our net asset value per share.

The market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations. If the market price of our common stock declines, you may be unable to resell your shares at or above the price you paid for such shares. We cannot assure you that the market price of our common stock will not fluctuate or decline in the future.

Additionally, the market value of the equity securities of a REIT is based upon the market’s perception of the REIT’s growth potential and its current and potential future cash distributions, whether from operations, sales or refinancings, and upon the real estate market value of the underlying assets. Our common stock may trade at prices that are higher or lower than our net asset value per share. To the extent we retain operating cash flows for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of our common stock.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: our financial condition, performance, liquidity and prospects; actual or anticipated variations in our quarterly operating results or distributions; changes in our funds from operations, or FFO, or earnings; publication of research reports about us or the real estate industry; changes in earnings estimates by analysts and our ability to meet analysts’ earnings estimates; increases in market interest rates that lead purchasers of our shares to demand a higher yield; the market for similar securities issued by REITs; the attractiveness of REIT securities in comparison to the securities of other companies, taking into account, among other things, the higher tax rates imposed on dividends paid by REITs; government legislation, action or regulation; our issuance of debt or preferred equity securities; the realization of any of the other risk factors presented in this Annual Report on Form 10-K; and general market, including capital market and real estate market, and economic conditions.

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Item 1B.     Unresolved Staff Comments.
None.


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:

TypeNumber of Buildings or Improved Land Parcels
Annualized Base Rent (000's) 1
% of Total
Warehouse/distribution197 $124,474 82.0 %
Flex10 7,6175.0 %
Transshipment15 8,0565.3 %
Improved land25 11,7707.7 %
Total247 $151,917 100.0 %


1Annualized 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 AngelesNorthern New Jersey/New York CitySan Francisco Bay AreaSeattleMiamiWashington, D.C.Total/Weighted Average
Investments in Real Estate
Number of Buildings43 62 41 31 27 18 222 
Rentable Square Feet2,584,648 3,555,250 2,056,695 2,098,302 1,370,872 1,534,625 13,200,392 
% of Total19.6 %26.9 %15.6 %15.9 %10.4 %11.6 %100.0 %
Occupancy % as of December 31, 202098.8 %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 Total17.2 %28.0 %19.4 %14.3 %9.2 %11.9 %100.0 %
Annualized Base Rent1 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 Parcels25 
Acres16.4 48.6 4.0 5.9 3.2 13.4 91.5 
% of Total17.9 %53.2 %4.4 %6.4 %3.5 %14.6 %100.0 %
Occupancy % as of December 31, 2020100.0 %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 Total28.9 %47.5 %5.5 %7.5 %3.4 %7.2 %100.0 %
Annualized Base Rent1 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 Value20.7 %29.2 %17.4 %16.0 %7.0 %9.7 %100.0 %

1Annualized 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.
2Weighted 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.
3Includes 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,
 2020201920202019
Building improvements$3,210 $8,171 $15,311 $21,385 
Tenant improvements1,163 2,268 2,868 4,669 
Leasing commissions3,698 3,224 13,408 7,813 
Redevelopment, renovation and expansion265 4,336 7,026 27,968 
Total capital expenditures 1
$8,336 $17,999 $38,613 $61,835 
1Includes 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:
CustomerLeases
Rentable
Square Feet
% of Total
Rentable
Square Feet
Annualized
Base Rent
(000’s) 1
% of Total
Annualized
Base Rent
Amazon.com 2
471,880 3.6 %$8,198 5.4 %
FedEx Corporation 3
314,519 2.4 %5,114 3.4 %
United States Government300,732 2.3 %3,748 2.5 %
Danaher171,707 1.3 %3,732 2.5 %
District of Columbia234,071 1.8 %3,334 2.2 %
United States Postal Service125,950 1.0 %2,758 1.8 %
DirectBuy Home Improvement230,891 1.7 %1,915 1.3 %
Costco-Innovel Solutions LLC219,910 1.7 %1,816 1.2 %
XPO Logistics 180,717 1.4 %1,732 1.1 %
10 L3 Harris Technologies, Inc.147,898 1.1 %1,651 1.1 %
11 O'Neill Logistics237,692 1.8 %1,466 1.0 %
12 Topaz Lighting Corp.190,000 1.4 %1,463 1.0 %
13 
Port Kearny Security, Inc. 4
— — %1,458 1.0 %
14 YRC61,252 0.5 %1,423 0.9 %
15 Envogue International192,000 1.5 %1,411 0.9 %
16 Bar Logistics203,263 1.5 %1,393 0.9 %
17 Lilac Solutions Inc.92,884 0.7 %1,338 0.9 %
18 Saia Motor Freight Line LLC52,086 0.4 %1,280 0.8 %
19 Space Systems/Loral LLC107,060 0.8 %1,246 0.8 %
20 JAM'N Logistics110,336 0.7 %1,229 0.7 %
Total51 3,644,848 27.6 %$47,705 31.4 %
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1Annualized 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.
2Includes an improved land parcel consisting of 2.8 acres.
3Includes two improved land parcels totaling 7.8 acres.
4Lease 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 %
20221,636,765 12.4 %18,233 10.6 %
20231,892,122 14.3 %24,060 13.9 %
20241,569,617 11.9 %20,766 12.0 %
20251,558,816 11.8 %23,514 13.6 %
Thereafter4,478,187 33.9 %65,576 38.0 %
Total12,912,113 97.8 %$172,666 100.0 %
 
1Includes leases that expire on or after December 31, 2020 and month-to-month leases totaling approximately 68,412 square feet.
2Annualized 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
 

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “TRNO”. As of January 21, 2021, there were approximately 32,378 holders of record of shares of our common stock. This number does not include stockholders for which shares are held in “nominee” or “street” name.
Distribution Policy
We intend to pay regular quarterly distributions when, as and if authorized by our board of directors and declared by us. Our ability to make distributions to our stockholders also will depend on our levels of retained cash flows, which we intend to use as a source of investment capital. In order to qualify for taxation as a REIT, we must distribute to our stockholders an amount at least equal to:
 
(i)90% of our REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gain); plus
(ii)90% of the excess of our after-tax net income, if any, from foreclosure property over the tax imposed on such income by the Code; less
(iii)the sum of certain items of non-cash income.
Generally, we expect to distribute 100% of our REIT taxable income so as to avoid the income and excise tax on undistributed REIT taxable income. However, we cannot assure you as to our ability to sustain those distributions.
The timing and frequency of distributions will be authorized by our board of directors and declared by us based upon a variety of factors, including:
 
actual results of operations;
our level of retained cash flows;
any debt service requirements;
capital expenditure requirements for our properties;
our property dispositions;
our taxable income;
the annual distribution requirement under the REIT provisions of the Code;
our operating expenses;
restrictions on the availability of funds under Maryland law; and
other factors that our board of directors may deem relevant.
To the extent that, in respect of any calendar year, cash available for distribution is less than our REIT taxable income, we could be required to sell assets or borrow funds to make cash distributions or make a portion of the required distribution in the form of a taxable share distribution or distribution of debt securities. Income as computed for purposes of the tax rules described above will not necessarily correspond to our income as determined for financial reporting purposes.
Distributions to our stockholders generally are taxable to our stockholders as ordinary income; however, because a significant portion of our investments are equity ownership interests in industrial properties, which generate depreciation and other non-cash charges against our income, a portion of our distributions may constitute a tax-free return of capital, although our current intention is to limit the level of such return of capital.
 
Performance Graph
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The following graph compares the change in the cumulative total stockholder return on our common stock during the period from December 31, 2015 to December 31, 2020 with the cumulative total return of the Standard and Poor’s 500 Stock Index, the MSCI U.S. REIT Index (RMS) and the FTSE Nareit Equity Industrial Index. The return shown on the graph is not necessarily indicative of future performance. The comparison assumes that $100 was invested on December 31, 2015 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.
 

trno-20201231_g1.jpg

The performance graph and related information shall not be deemed “soliciting material” or be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing, except to the extent that the company specifically incorporates it by reference into such filing.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities
None.

Item 6.     Reserved


Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with the sections of this Annual Report on Form 10-K entitled “Risk Factors”, “Forward-Looking Statements”, “Business” and our audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially
27


from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We acquire, own and operate industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. We invest in several types of industrial real estate, including warehouse/distribution buildings (approximately 82.0% of our total annualized base rent as of December 31, 2020), flex buildings (including light industrial and R&D) (approximately 5.0%), transshipment buildings (approximately 5.3%) and improved land parcels (approximately 7.7%). 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. 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, our 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. We are an internally managed Maryland corporation and elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 2010.
Our Investment Strategy
We acquire, own and operate industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. We invest in several types of industrial real estate, including warehouse/distribution, flex (including light industrial and R&D), transshipment and improved land. 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.
We selected our target markets by drawing upon the experience of our executive management investing and operating in over 50 global industrial markets located in North America, Europe and Asia, the fundamentals of supply and demand, and in anticipation of trends in logistics patterns resulting from population changes, regulatory and physical constraints, changes in technology, e-commerce, the economic and environmental benefits of reducing vehicle miles traveled and other factors. We believe that our target markets have attractive long term investment attributes. We target assets with characteristics that include, but are not limited to, the following:
 
Located in high population coastal markets;
Close proximity to transportation infrastructure (such as sea ports, airports, highways and railways);
Situated in supply-constrained submarkets with barriers to new industrial development, as a result of physical and/or regulatory constraints;
Functional and flexible layout that can be modified to accommodate single and multiple tenants;
Acquisition price at a discount to the replacement cost of the property;
Potential for enhanced return through re-tenanting or operational and physical improvements; and
Opportunity for higher and better use of the property over time.
In general, we prefer to utilize local third-party property managers for day-to-day property management and as a source of acquisition opportunities. We believe outsourcing property management is cost effective and provides us with operational flexibility. We may directly manage properties in the future if we determine such direct property management is in our best interest.
We have no current intention to acquire undeveloped or unimproved industrial land or to pursue greenfield ground up development. Nevertheless, we pursue redevelopment, renovation and expansion opportunities of properties that we own, acquire properties and improved land parcels with the intent to redevelop in the near-term, and acquire adjacent land to expand our existing facilities.
We expect that we will continue to acquire the significant majority of our investments as equity interests in individual properties or portfolios of properties. We may acquire industrial properties through the acquisition of other corporations or entities that own industrial real estate. We will opportunistically make investments in debt secured by industrial real estate that would otherwise meet our investment criteria with the intention of ultimately acquiring the underlying real estate. We currently do not intend to target specific percentages of holdings of particular types of industrial properties. This expectation is based upon prevailing market conditions and may change over time in response to different prevailing market conditions.
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The properties we acquire may be stabilized (fully leased) or unstabilized (have near term lease expirations, be partially or fully vacant and may require physical repositioning).
We sell properties from time to time when we believe the prospective total return from a property is particularly low relative to its market value and/or the market value of the property is significantly greater than its estimated replacement cost. Capital from such sales is reinvested into properties that are expected to provide better prospective returns or returned to shareholders. We have disposed of 23 properties since inception in 2010 for an aggregate sales price of approximately $364.7 million and a total gain of approximately $119.9 million.
2020 Developments
COVID-19
The COVID-19 pandemic, and mitigation measures put in place by governments to slow it, have caused significant economic disruption. We are headquartered in San Francisco and our employees have been working remotely in accordance with recommendations by the City of San Francisco since March 2020. We utilize local, third-party property managers, and they are generally working remotely, as recommended by their municipalities. We have business continuity and communication plans that have allowed, and we believe, although there can be no assurance, will continue to allow us to operate and manage our portfolio effectively during such disruptions. We expect that we will, for the intermediate term, employ lower density work arrangements consistent with social distancing and our business continuity plan.
While the impact of the COVID-19 pandemic on our business is not possible to predict accurately, we continue to work
with our customers who have been forced to close or otherwise limit operations or whose businesses have been adversely impacted during the COVID-19 pandemic to, on a case-by-case basis, provide rent deferments. Through February 8, 2021, we have granted rent deferrals to 62 tenants aggregating approximately 2.8% of annualized base rent. No rent abatements were granted. For the 62 rent deferrals granted:

17 tenants aggregating 0.3% of annualized base rent (11.0% of total deferrals) have completed their rent deferral period and have fully repaid the deferral amounts;

31 tenants aggregating 2.1% of annualized base rent (73.6% of total deferrals) have not completed their rent deferral repayment period and are fulfilling the terms of their deferral agreements; and

14 tenants aggregating 0.4% of annualized base rent (15.4% of total deferrals) have defaulted on their rent deferral repayments.
The acquisition and disposition markets slowed in the early months of the COVID-19 pandemic as market participants searched for price discovery. While transaction markets have returned to more normal volumes, our acquisition volume will remain dependent on both the quality and pricing of the opportunity set and the price of our stock relative to net asset value per share. We believe, although there can be no assurance, that our balance sheet is well positioned to make opportunistic acquisitions as we have only $11.3 million of debt maturities expiring in 2021 and no balance outstanding on our $250 million revolving credit facility. In addition, we had a cash balance of approximately $107.2 million as of December 31, 2020. See “Item 1A - Risk Factors” in this Annual Report on Form 10-K for additional discussion regarding the risks to which we are and may be subject as a result of the COVID-19 pandemic.

Acquisition Activity
During 2020, we acquired six industrial buildings containing approximately 0.2 million square feet and five improved land parcels containing approximately 12.0 acres for a total purchase price of approximately $96.7 million. The buildings and improved land parcels were acquired from unrelated third parties using existing cash on hand, net proceeds from dispositions and net proceeds from the issuance of common stock. The following table sets forth the industrial buildings and improved land parcels we acquired during 2020:
 
29


Property NameLocationAcquisition Date
Number of
Buildings
Square
Feet
Purchase Price
(in thousands) 1
Stabilized
Cap Rate 2
Old Bayshore 3
San Jose, CAMarch 12, 2020— — $11,784 5.0 %
GladwickRancho Dominguez, CAMarch 12, 202065,670 17,950 3.6 %
84th Kent 4
Kent, WAApril 17, 2020— — 4,500 5.7 %
HudsonSeattle, WAMay 31, 202013,000 5,611 4.0 %
Starlite StreetSouth San Francisco, CAJuly 10, 202022,275 6,300 4.7 %
Aviation Blvd 5
Inglewood, CAOctober 26, 2020— — 10,000 5.7 %
Porter StreetLos Angeles, CANovember 5, 202012,618 4,400 4.5 %
SE 32nd StreetBellevue, WANovember 6, 202038,883 11,737 4.9 %
Maple Street 6
Rancho Dominguez, CADecember 5, 2020— — 9,750 5.7 %
East Marginal 7
Tukwila, WADecember 30, 2020— — 6,625 4.6 %
McLarenIrvine, CADecember 30, 202011,348 8,000 4.0 %
Total/Weighted Average163,794 $96,657 4.7 %
 
1The total aggregate initial investment was approximately $100.4 million, including $1.7 million in closing costs and acquisition costs. Additionally, we assumed $2.1 million in intangible liabilities.
2Stabilized capitalization rates, referred to herein as stabilized cap rates, are calculated, at the time of acquisition, as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property. Total acquisition cost basis for the property includes the initial purchase price, the effects of marking assumed debt to market, buyer’s due diligence and closing costs, estimated near-term capital expenditures and leasing costs necessary to achieve stabilization. We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles. These stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in this Annual Report on Form 10-K.
3An improved land parcel containing approximately 2.7 acres.
4An improved land parcel containing approximately 2.8 acres.
5An improved land parcel containing approximately 1.9 acres.
6An improved land parcel containing approximately 2.5 acres.
7An improved land parcel containing approximately 2.1 acres.

Redevelopment Activity

As of December 31, 2020, we owned one property under redevelopment that will 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 as follows:

Property Name
Total Expected Investment (in thousands) 1
Amount Spent to Date (in thousands)Estimated Amount Remaining to Spend (in thousands)
Estimated Stabilized Cap Rate 2
Estimated Completion Quarter% Pre-leased December 31, 2020
Sodo Row - North & South$64,109 $61,448 $2,661 4.3 %Q4 202114.0 %

1Total expected investment for the property includes the initial purchase price, buyer’s due diligence and closing costs, estimated near-term redevelopment expenditures, capitalized interest and leasing costs necessary to achieve stabilization.
2Estimated stabilized cap rates are calculated as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property. We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles. These estimated stabilized cap rates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in this Annual Report on Form 10-K.

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During the year ended December 31, 2020, we completed redevelopment of our Kent 192 property in Kent, Washington and 6th Avenue South property in Seattle, Washington, with estimated stabilized cap rates of 5.0% and 5.1%, respectively. The total aggregate investment was approximately $49.8 million consisting of approximately 0.3 million square feet.

Disposition Activity
During the year ended December 31, 2020, we sold three properties located in the Washington, D.C. market for a total aggregate sales price of approximately $51.3 million, resulting in a gain of approximately $17.8 million, and one property located in the Miami market for a sales price of approximately $22.2 million, resulting in a gain of approximately $9.0 million.
The following summarizes the condensed results of operations of the properties sold during the year ended December 31, 2020 for the years ended December 31, 2020, 2019 and 2018 (in thousands):
 
 For the Year Ended December 31,
 202020192018
Rental revenues$2,167 $4,007 $3,962 
Tenant expense reimbursements449 1,199 1,064 
Property operating expenses(690)(1,631)(1,402)
Depreciation and amortization(415)(1,664)(1,685)
Income from operations$1,511 $1,911 $1,939 
ATM Program
We have an at-the-market equity offering program (the “$300 Million ATM Program”) pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million ($84.1 million remaining as of December 31, 2020) in amounts and at times as we determine from time to time. We intend to use the net proceeds from the offering of the shares under the $300 Million ATM Program, if any, for general corporate purposes, which may include future acquisitions and repayment of indebtedness, including borrowings under our revolving credit facility. During 2020, we issued an aggregate of 1,197,597 shares of common stock at a weighted average offering price of $54.08 per share under the $300 Million ATM Program, resulting in net proceeds of approximately $63.8 million and paying total compensation to the applicable sales agents of approximately $0.9 million.

Senior Secured Loan
We had a senior secured loan (the “Senior Secured Loan”) outstanding to a borrower that bore interest at a fixed annual interest rate of 8.0% and was fully repaid in May 2020. The Senior Secured Loan was secured by a portfolio of six improved land parcels located primarily in Newark, New Jersey.

Share Repurchase Program
We have a share repurchase program authorizing us to repurchase up to 3,000,000 shares of our outstanding common stock from time to time through December 31, 2022 (extended from December 31, 2020 by our board of directors on November 3, 2020). Purchases made pursuant to the program, if any, will be made in either the open market or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. As of December 31, 2020, we have not repurchased any shares of our common stock pursuant to our share repurchase program.

Dividend and Distribution Activity
The following table sets forth the cash dividends paid or payable per share during the year ended December 31, 2020:
 
For the Three
Months Ended
Security
Dividend
per Share
Declaration DateRecord DateDate Paid
March 31, 2020Common stock$0.27February 5, 2020March 27, 2020April 10, 2020
June 30, 2020Common stock$0.27May 5, 2020June 30, 2020July 14, 2020
September 30, 2020Common stock$0.29August 4, 2020October 2, 2020October 16, 2020
December 31, 2020Common stock$0.29November 3, 2020December 15, 2020January 5, 2021
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Contractual Commitments
As of February 9, 2021, we have outstanding contracts with third-party sellers to acquire six industrial properties for a total aggregate purchase price of approximately $123.8 million, as further described under the heading “Contractual Obligations” in this Annual Report on Form 10-K. There is no assurance that we will acquire the properties under contract because the proposed acquisitions are subject to the completion of satisfactory due diligence and various closing conditions.

Outlook

Current operating conditions in our six markets for our business are very good. We believe that on average, the rental rates we are likely to achieve on new or renewed leases for our 2021 expirations will be above the rates currently paid for the same space. However, new speculative development continues. This new development will slow potential rent growth from what it would be without such new development.

We see attractive acquisition opportunities and expect our 2021 acquisition volume to exceed that of 2020, perhaps significantly so. Nevertheless, our acquisition volume will be dependent on both the quality and pricing of the opportunity set and the price of our stock relative to net asset value (“NAV”). Those conditions, not knowable in advance, will determine our results. We will continue to sell assets and redeploy the capital to enhance NAV or return the capital to shareholders. We entered 2021 with our balance sheet exceedingly well positioned for growth, as we have no balance outstanding on our $250 million revolving credit facility and a cash balance of approximately $107.2 million. 

Eleven years ago, we completed our $175 million blind-pool IPO with a plan to invest in infill industrial real estate in the six best coastal U.S. markets. Since then, we have grown to approximately $4.5 billion, with $4.0 billion of equity as of December 31, 2020.

Within our six markets we have increasingly focused on urban infill locations. While our net growth will remain limited to a size where we can make directly informed operational decisions, we feel more strongly today than we did eleven years ago about the long-term investment merits of our strategy and the growth opportunities ahead. We are mindful, always, that it is per share rather than aggregate results that matter.

We believe in the long-term operating prospects of our functional, extremely infill coastal assets. We believe in sound balance sheet management. We believe in the benefits of our market-leading corporate governance and exceptionally aligned executive management compensation. As a result, we are enthusiastic about the future and our ability to produce superior results for our shareholders over time.

Our outlook is subject to the risks set forth in this Annual Report on Form 10-K, including the risks set form in “Item 1A - Risk Factors”.
Inflation
Although the U.S. economy has been experiencing relatively modest inflation rates recently, and a wide variety of industries and sectors are affected differently by changing commodity prices, inflation has increased construction costs but has not had a significant impact on our operating costs. Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. In addition, leases with respect to approximately 63.9% of our total rentable square feet expire within five years which enables us to seek to replace existing leases with new leases at the then-existing market rate.

Financial Condition and Results of Operations
We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties. These revenues include fixed base rents and recoveries of certain property operating expenses that we have incurred and that we pass through to the individual tenants. 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.
Our primary cash expenses consist of our property operating expenses, which include: real estate taxes, repairs and maintenance, management expenses, insurance, utilities, general and administrative expenses, which include compensation costs, office expenses, professional fees and other administrative expenses, acquisition costs, which include third-party costs paid to brokers and consultants, and interest expense, primarily on our mortgage loans, revolving credit facility, term loans and senior unsecured notes.
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Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions at various times during the course of such periods. The results of operations of any acquired property are included in our financial statements as of the date of its acquisition.
The following analysis of our results below for the years ended December 31, 2020 and 2019 includes the changes attributable to same store properties. The same store pool for the comparison of the 2020 and 2019 fiscal years includes all properties that were owned and in operation as of December 31, 2020 and since January 1, 2019 and excludes properties that were either disposed of prior to, held for sale to a third-party or in redevelopment as of December 31, 2020. As of December 31, 2020, the same store pool consisted of 198 buildings aggregating approximately 12.0 million square feet representing approximately 91.1% of our total square feet owned and 14 improved land parcels consisting of approximately 54.2 acres. As of December 31, 2020, the non-same store properties, which we acquired, redeveloped or sold during 2019 and 2020, or were held for sale (if any) or in redevelopment as of December 31, 2020, consisted of 24 buildings aggregating approximately 1.2 million square feet, 11 improved land parcels consisting of approximately 37.3 acres and one property under redevelopment expected to contain approximately 0.2 million square feet upon completion. As of December 31, 2020 and 2019, our consolidated same store pool occupancy was approximately 98.0% and 97.8%, respectively.
Our future financial condition and results of operations, including rental revenues, straight-line rents and amortization of lease intangibles, may be impacted by the acquisitions of additional properties, and expenses may vary materially from historical results.

33


Comparison of the Year Ended December 31, 2020 to the Year Ended Year Ended December 31, 2019:
 
 For the Year Ended December 31,  
 20202019$ Change% Change
 (Dollars in thousands) 
Rental revenues 1
Same store$124,992 $121,191 $3,801 3.1 %
Non-same store operating properties 2
22,109 13,455 8,654 64.3 %
Total rental revenues147,101 134,646 12,455 9.3 %
Tenant expense reimbursements 1
Same store36,327 33,925 2,402 7.1 %
Non-same store operating properties 2
3,456 2,451 1,005 41.0 %
Total tenant expense reimbursements39,783 36,376 3,407 9.4 %
Total revenues186,884 171,022 15,862 9.3 %
Property operating expenses
Same store42,601 39,655 2,946 7.4 %
Non-same store operating properties 2
6,495 4,546 1,949 42.9 %
Total property operating expenses49,096 44,201 4,895 11.1 %
Net operating income 3
Same store118,718 115,461 3,257 2.8 %
Non-same store operating properties 2
19,070 11,360 7,710 67.9 %
Total net operating income$137,788 $126,821 $10,967 8.6 %
Other costs and expenses
Depreciation and amortization45,875 44,015 1,860 4.2 %
General and administrative23,489 23,924 (435)(1.8)%
Acquisition costs271 45 226 502.2 %
Total other costs and expenses69,635 67,984 1,651 2.4 %
Other income (expense)
Interest and other income873 3,815 (2,942)(77.1)%
Interest expense, including amortization(15,997)(16,338)341 (2.1)%
Loss on extinguishment of debt— (189)189 (100.0)%
Gain on sales of real estate investments26,766 9,391 17,375 185.0 %
Total other income and (expenses)11,642 (3,321)14,963 n/a
Net income$79,795 $55,516 $24,279 43.7 %
 
1On January 1, 2019, we adopted the practical expedient under Accounting Standards Update (“ASU”) No. 2018-11, Leases (Topic 842), Targeted Improvements, which allows us to elect not to separate lease and non-lease rental income. All rental income earned pursuant to tenant leases is reflected as one line, “Rental revenues and tenant expense reimbursements” on our accompanying consolidated statements of operations. We believe that the above presentation of rental revenues and tenant expense reimbursements is not, and is not intended to be, a presentation in accordance with accounting principals generally accepted in the United States of America ("GAAP"). We believe this information is frequently used by management, investors, and other interested parties to evaluate our performance. See “Note 2 - Significant Accounting Policies” in our condensed notes to consolidated financial statements for more information regarding our adoption of this standard.
2Includes 2019 and 2020 acquisitions and dispositions, eleven improved land parcels and one property under redevelopment as of December 31, 2020.
3Includes straight-line rents and amortization of lease intangibles. See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a reconciliation of net operating income and same store net operating income from net income and a discussion of why we believe net operating income and same store net operating income are useful supplemental measures of our operating performance.
34


Revenues. Total revenues increased approximately $15.9 million for the year ended December 31, 2020 compared to the prior year due primarily to property acquisitions during 2019 and 2020 and increased revenue on new and renewed leases. Cash rents on new and renewed leases totaling approximately 2.6 million square feet commencing during the year ended December 31, 2020 increased approximately 22.1% compared to the same period from the prior year. For the three months and year ended December 31, 2020, approximately $1.3 million and $4.3 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants. During the year ended December 31, 2020, primarily due to the effects of COVID-19 on our tenants, approximately $1.3 million in straight-line rent receivables was reversed. Additionally, during the year ended December 31, 2020, we terminated a lease with the existing tenant at our Belleville property and executed a new lease with a leading e-commerce firm. The lease termination fee received was approximately $3.3 million and the non-cash deferred rent receivable write-off was approximately $3.2 million.
Property operating expenses. Total property operating expenses increased approximately $4.9 million during the year ended December 31, 2020 compared to the prior year. The increase in total property operating expenses was due primarily to an increase of approximately $1.1 million in utilities and maintenance expenses and $1.5 million attributable to increases in real estate taxes for properties included in our same store pool.
Depreciation and amortization. Depreciation and amortization increased approximately $1.9 million during the year ended December 31, 2020 compared to the prior year due to property acquisitions during 2019 and 2020.
General and administrative expenses. General and administrative expenses decreased approximately $0.4 million for the year ended December 31, 2020 compared to the prior year due primarily to decreased performance share award expense offset by increased compensation expense. The decrease in performance share award expense primarily related to the expense for performance share awards granted prior to January 1, 2019, which varies quarter to quarter based on our relative share price performance. Performance share award expense for the year ended December 31, 2020 was approximately $6.6 million as compared to approximately $8.0 million for the prior year. See “Note 11 —Stockholder’s Equity” in our notes to the consolidated financial statements for more information regarding our performance share awards.
Acquisition costs. Acquisition costs increased $0.2 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to dead deal costs incurred during 2020 with respect to potential acquisitions that did not close.
Interest and other income. Interest and other income decreased approximately $2.9 million for the year ended December 31, 2020 compared to the prior year primarily due to lower interest and fees earned on our Senior Secured Loan, offset by interest earned on higher cash balances held during the year ended December 31, 2020.
Interest expense, including amortization. Interest expense decreased approximately $0.3 million for the year ended December 31, 2020 compared to the prior year due primarily to lower average interest rate on our term loan and lower average outstanding borrowings on our mortgage loans payable, offset by a decrease of $0.1 million in capitalized interest compared to the prior year.
Gain on sales of real estate investments. Gain on sales of real estate investments increased approximately $17.4 million for the year ended December 31, 2020 compared to the prior year. The aggregate sales price for property sales for the year ended December 31, 2020 was approximately $73.5 million as compared to approximately $48.9 million for the prior year.
The following analysis of our results below for the years ended December 31, 2019 and 2018 includes the changes attributable to same store properties. The same store pool for the comparison of the 2019 and 2018 fiscal years includes all properties that were owned and in operation as of December 31, 2019 and since January 1, 2018 and excludes properties that were either disposed of prior to, held for sale to a third-party or in redevelopment as of December 31, 2019. As of December 31, 2019, the same store pool consisted of 187 buildings aggregating approximately 11.8 million square feet representing approximately 88.6% of our total square feet owned and ten improved land parcels consisting of approximately 47.2 acres. As of December 31, 2019, the non-same store properties, which we acquired or sold during 2018 and 2019, were held for sale (if any) or in redevelopment as of December 31, 2019, consisted of 33 buildings aggregating approximately $1.5 million square feet, nine improved land parcels consisting of approximately 30.4 acres and four properties under redevelopment expected to contain approximately 0.5 million square feet upon completion. As of December 31, 2019 and 2018, our consolidated same store pool occupancy was approximately 98.4% and 99.1%, respectively.
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Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018:
 
 For the Year Ended December 31,  
 20192018$ Change% Change
 (Dollars in thousands) 
Rental revenues 1
Same store$115,505 $109,096 $6,409 5.9 %
Non-same store operating properties 2
19,141 9,087 10,054 110.6 %
Total rental revenues134,646 118,183 16,463 13.9 %
Tenant expense reimbursements 1
Same store33,287 31,948 1,339 4.2 %
Non-same store operating properties 2
3,089 1,526 1,563 102.4 %
Total tenant expense reimbursements36,376 33,474 2,902 8.7 %
Total revenues171,022 151,657 19,365 12.8 %
Property operating expenses
Same store38,302 37,539 763 2.0 %
Non-same store operating properties 2
5,899 2,449 3,450 140.9 %
Total property operating expenses44,201 39,988 4,213 10.5 %
Net operating income 3
Same store110,490 103,505 6,985 6.7 %
Non-same store operating properties 2
16,331 8,164 8,167 100.0 %
Total net operating income$126,821 $111,669 $15,152 13.6 %
Other costs and expenses
Depreciation and amortization44,015 40,816 3,199 7.8 %
General and administrative23,924 21,503 2,421 11.3 %
Acquisition costs45 124 (79)(63.7)%
Total other costs and expenses67,984 62,443 5,541 8.9 %
Other income (expense)
Interest and other income3,815 3,664 151 4.1 %
Interest expense, including amortization(16,338)(18,211)1,873 (10.3)%
Loss on extinguishment of debt(189)— (189)n/a
Gain on sales of real estate investments9,391 28,610 (19,219)(67.2)%
Total other income and expenses(3,321)14,063 (17,384)n/a
Net income$55,516 $63,289 $(7,773)(12.3)%
 
1On January 1, 2019, we adopted the practical expedient under ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, which allows us to elect not to separate lease and non-lease rental income. All rental income earned pursuant to tenant leases is reflected as one line, “Rental revenues and tenant expense reimbursements” on our accompanying consolidated statements of operations. We believe that the above presentation of rental revenues and tenant expense reimbursements is not, and is not intended to be, a presentation in accordance with GAAP. We believe this information is frequently used by management, investors, and other interested parties to evaluate our performance. See “Note 2 - Significant Accounting Policies” in our condensed notes to consolidated financial statements for more information regarding our adoption of this standard.
2Includes 2018 and 2019 acquisitions and dispositions, nine improved land parcels and four properties under redevelopment as of December 31, 2019.
3Includes straight-line rents and amortization of lease intangibles. See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for a reconciliation of net operating income and same store net operating income from net income and a discussion of why we believe net operating income and same store net operating income are useful supplemental measures of our operating performance.
36


Revenues. Total revenues increased approximately $19.4 million for the year ended December 31, 2019 compared to the prior year due primarily to property acquisitions during 2019 and 2018 and increased revenue on new and renewed leases. Cash rents on new and renewed leases totaling 0.2 million square feet commencing during the year ended December 31, 2019 increased approximately 17.3% compared to the same period from the prior year. For the three months and year ended December 31, 2019, approximately $0.3 million and $2.0 million, respectively, was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants.
Property operating expenses. Total property operating expenses increased approximately $4.2 million during the year ended December 31, 2019 compared to the prior year. The increase in total property operating expenses was due primarily to an increase of approximately $3.5 million attributable to property acquisitions during 2019 and 2018.
Depreciation and amortization. Depreciation and amortization increased approximately $3.2 million during the year ended December 31, 2019 compared to the prior year due to property acquisitions during 2019 and 2018.
General and administrative expenses. General and administrative expenses increased approximately $2.4 million for the year ended December 31, 2019 compared to the prior year due primarily to increased compensation expense, bonus expense, accounting service fees, and performance share award expense. The increase in performance share award expense primarily related to the expense for performance share awards granted prior to January 1, 2019, which varies quarter to quarter based on our relative share price performance. Performance share award expense for the year ended December 31, 2019 was approximately $8.0 million as compared to approximately $7.1 million for the prior year. See “Note 11 - Stockholder’s Equity” in our notes to the consolidated financial statements for more information regarding our performance share awards.

Acquisition costs. Acquisition costs decreased by approximately $0.1 million for the year ended December 31, 2019 compared to the year ended 2018.

Interest and other income. Interest and other income increased approximately $0.2 million for the year ended December 31, 2019 compared to the prior year primarily due to approximately $3.3 million in interest and fees earned on our Senior Secured Loan, which we made in May 2018, and higher cash balances and interest rates during 2019 compared to the prior year.

Interest expense, including amortization. Interest expense decreased approximately $1.9 million for the year ended December 31, 2019 compared to the prior year due primarily to lower average outstanding borrowings on our revolving credit facility and mortgage loans payable and an increase of $0.7 million in capitalized interest compared to the prior year.

Gain on sales of real estate investments. Gain on sales of real estate investments decreased approximately $19.2 million for the year ended December 31, 2019 compared to the prior year. The aggregate sales price for property sales for the year ended December 31, 2019 was approximately $48.9 million as compared to approximately $82.1 million for the prior year.
Liquidity and Capital Resources
The primary objective of our financing strategy is to maintain financial flexibility with a conservative capital structure using retained cash flows, proceeds from dispositions of properties, long-term debt and the issuance of common and perpetual preferred stock to finance our growth. Over the long-term, we intend to:
 
limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding perpetual preferred stock to less than 35% of our total enterprise value;
maintain a fixed charge coverage ratio in excess of 2.0x;
maintain a debt-to-adjusted EBITDA ratio below 6.0x;
limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness; and
have staggered debt maturities that are aligned to our expected average lease term (5-7 years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions.

We intend to preserve a flexible capital structure with a long-term goal to maintain our investment grade rating and be in a position to issue additional unsecured debt and perpetual preferred stock. Fitch Ratings assigned us an issuer rating of BBB with a stable outlook. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. There can be no assurance that we will be able to maintain our current credit rating. Our credit rating can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. In the event our current credit rating is downgraded, it may become difficult or expensive to obtain additional
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financing or refinance existing obligations and commitments. We intend to primarily utilize senior unsecured notes, term loans, credit facilities, dispositions of properties, common stock and perpetual preferred stock. We may also assume debt in connection with property acquisitions which may have a higher loan-to-value ratio.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under our revolving credit facility. We believe that our net cash provided by operations will be adequate to fund operating requirements, pay interest on any borrowings and fund distributions in accordance with the REIT requirements of the federal income tax laws. In the near-term, we intend to fund future investments in properties with cash on hand, term loans, senior unsecured notes, mortgages, borrowings under our revolving credit facility, perpetual preferred and common stock issuances and, from time to time, property dispositions. We expect to meet our long-term liquidity requirements, including with respect to other investments in industrial properties, property acquisitions, property redevelopments, renovations and expansions and scheduled debt maturities, through borrowings under our revolving credit facility, periodic issuances of common stock, perpetual preferred stock, and long-term secured and unsecured debt, and, from time to time, with proceeds from the disposition of properties. The success of our acquisition strategy may depend, in part, on our ability to obtain and borrow under our revolving credit facility and to access additional capital through issuances of equity and debt securities.
The following sets forth certain information regarding our current at-the-market common stock offering program as of December 31, 2020:
ATM Stock Offering ProgramDate Implemented
Maximum Aggregate
Offering Price
(in thousands)
Aggregate Common Stock Available as of December 31, 2020 (in thousands)
 $300 Million ATM ProgramMay 17, 2019$300,000 $84,090 
The table below sets forth the activity under our at-the-market common stock offering programs during the years ended December 31, 2020 and 2019, respectively (in thousands, except share and price per share data):
For the Year EndedShares Sold
Weighted Average
Price Per Share
Net ProceedsSales Commissions
December 31, 20201,197,597$54.08 $63,828 $939 
December 31, 20196,064,576$45.85 $275,026 $4,032 
Our Senior Secured Loan bore interest at a fixed annual interest rate of 8.0% and was fully repaid in May 2020. The Senior Secured Loan was secured by a portfolio of six improved land parcels located primarily in Newark, New Jersey. As of December 31, 2020 and December 31, 2019, there was approximately $0 and $15.9 million, respectively, net of deferred loan fees of approximately $0 and $0.1 million, respectively, outstanding on the Senior Secured Loan and approximately $0 and $0.3 million, respectively, of interest receivable outstanding on the Senior Secured Loan.
As of December 31, 2020, we had $50.0 million of senior unsecured notes that mature in September 2022, $100.0 million of senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million of senior unsecured notes that mature in October 2027 and $100.0 million of senior unsecured notes that mature in December 2029 (collectively, the “Senior Unsecured Notes”) and a credit facility (the “Facility”), which consists of a $250.0 million unsecured revolving credit facility that matures in October 2022 and a $100.0 million term loan that matures in January 2022. As of both December 31, 2020 and December 31, 2019, there were no borrowings outstanding on our revolving credit facility and $100.0 million of borrowings outstanding on our term loan.
As of December 31, 2020, we had one interest rate cap to hedge the variable cash flows associated with $50.0 million of our existing $100.0 million variable-rate term loan. The cap has a notional value of $50.0 million and will effectively cap the annual interest rate payable at 4.0% plus 1.20% to 1.70%, depending on leverage, with respect to $50.0 million for the period from December 1, 2014 (effective date) to May 4, 2021. As of December 31, 2019, we had an additional interest rate cap with a notional value of $50.0 million (which expired on February 3, 2020) to hedge the variable cash flows associated with $50.0 million of our existing $100.0 million variable-rate term loan. We are required to make certain monthly variable rate payments on the term loan, while the applicable counterparty is obligated to make certain monthly floating rate payments based on LIBOR to us in the event LIBOR is greater than 4.0%, referencing the same notional amount.
The aggregate amount of the Facility may be increased to a total of up to $600.0 million, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. Outstanding borrowings under the Facility are limited to the lesser of (i) the sum of the $250.0 million revolving credit facility and the $100.0 million term loan or (ii) 60.0% of the value of the unencumbered properties. Interest on the Facility, including the term loan, is
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generally to be paid based upon, at our option, either (i) LIBOR plus the applicable LIBOR margin or (ii) the applicable base rate which is the greatest of the administrative agent’s prime rate, 0.50% above the federal funds effective rate, or thirty-day LIBOR plus the applicable LIBOR margin for LIBOR rate loans under the Facility plus 1.25%. The applicable LIBOR margin will range from 1.05% to 1.50% (1.05% as of December 31, 2020) for the revolving credit facility and 1.20% to 1.70% (1.20% as of December 31, 2020) for the $100.0 million term loan, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value. The Facility requires quarterly payments of an annual facility fee in an amount ranging from 0.15% to 0.30% depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value.
The Facility and the Senior Unsecured Notes are guaranteed by us and by substantially all of the current and to-be-formed subsidiaries of the borrower that own an unencumbered property. The Facility and the Senior Unsecured Notes are unsecured by our properties or by interests in the subsidiaries that hold such properties. The Facility and the Senior Unsecured Notes include a series of financial and other covenants with which we must comply. We were in compliance with the covenants under the Facility and the Senior Unsecured Notes as of December 31, 2020 and 2019.
As of December 31, 2020 and 2019, we had outstanding mortgage loans payable, net of deferred financing costs, of approximately $11.3 million and $44.3 million, respectively, and held cash and cash equivalents totaling approximately $107.2 million and $110.1 million, respectively. Subsequent to December 31, 2020, we used cash on hand to repay the mortgage loan payable of $11.3 million.
The following tables summarize our debt maturities and principal payments as of and for the year ended December 31, 2020, and market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the years ended December 31, 2020 and 2019 (dollars in thousands – except per share data):
Credit
Facility
Term
Loans
Senior
Unsecured
Notes
Mortgage
Loans
Payable
Total Debt
2021$— $— $— $11,271 $11,271 
2022— 100,000 50,000 — 150,000 
2023— — — — — 
2024— — 100,000 — 100,000 
2025— — — — — 
Thereafter— — 200,000 — 200,000 
Total Debt— 100,000 350,000 11,271 461,271 
Deferred financing costs, net— (209)(1,937)(7)(2,153)
Total Debt, net$— $99,791 $348,063 $11,264 $459,118 
Weighted average interest raten/a1.3 %3.8 %5.5 %3.3 %

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As of December 31, 2020As of December 31, 2019
Total Debt, net$459,118