Maximize Operating Cash Flows

We were very pleased with 2008 operating results, which included year end occupancy of 93.2%, rent growth of 10.5% on signed leases and tenant retention of 76.3% related to expiring leases.  Further, cash provided by operating activities increased to $128.3 million in 2008 from $116.9 million in 2007.  Renewing tenants, leasing space and effectively managing expenses are critical in the current market environment and are the day to day focus of our operations team.  Due to softening market demand, we have increased our leasing team in the field to make sure we are responding to each and every opportunity quickly and successfully while cultivating deeper tenant relationships.

Manage Our Development Pipeline

In anticipation of the deteriorating market, we ceased entering into new development commitments early in 2008, but have remained very focused on leasing the existing pipeline of properties under development.  During the year, we were successful in completing the lease-up or sale of 6 development properties, representing 1.3 million square feet, but we were disappointed with the lack of additional leasing progress as many users of industrial space have postponed relocation and expansion plans in response to the uncertain business environment.  Leasing remains a top priority for 2009.

We continued to make progress at SCLA (Southern California Logistics Airport), our development joint venture located in the Inland Empire market of Southern California where we control more than 4,000 acres of land.  We have four buildings totaling 1.5 million square feet under development, with leasing on pace with our initial projections.  Activity from potential tenants also remains encouraging.  During the first quarter of 2009, we completed a major land sale to Dr Pepper Snapple Group, generating a substantial gain and further validating the project as a strong regional distribution location.

Recycle Capital Efficiently

Important to managing our balance sheet as well as increasing our overall return on assets is the on-going effort to sell non-strategic assets for redeployment into new, higher growth opportunities.  During 2008, we sold $143 million of assets in 10 transactions for a net gain of $20 million.  We were very pleased with this result, and while market conditions have become even more challenging, we expect the distress caused by dysfunctional credit markets and challenging leasing markets to result in more attractive acquisition opportunities than we have seen in many years.  Given our solid balance sheet, strong team of real estate professionals and excellent relationships with investors and brokers, we believe we are well positioned to identify and take advantage of those opportunities.  However, we will continue to exercise patience and discipline as we evaluate potential acquisitions that we believe will generate attractive returns for our stockholders. 

Expand our Institutional Capital Management Platform

DCT Industrial’s institutional capital management platform consists of five joint ventures with three institutions.  At year end, assets under management totaled $772 million, representing an increase of more than $85 million from the end of 2007.  Co-investing with institutional capital enables the Company to increase our return on invested capital through fees earned, augment our acquisition activity, deepen our market presence and customer relationships, and increase our access to capital for continued growth.  We will continue to work closely with our existing partners to maximize the value of our joint venture properties, as well as look for new opportunities to deploy capital at attractive returns.

Create Value in Mexico

We own 1.1 million square feet of industrial properties in Mexico, which were 91.2% leased at year end, and have an additional three properties totaling 354,000 square feet under development.  As with the U.S., the Mexican economy and its real estate markets noticeably softened in 2008 after enjoying a very long run of success.  In response, we have put new capital deployment on hold and have devoted all of our efforts on leasing existing space to increase cash flow and value.  While we do not anticipate making any further investments in the near-term, we continue to monitor the markets and stay in close touch with our network of market contacts, as attractively priced opportunities are likely to present themselves in the future as a result of the stress on current land and building owners.