Phil Hawkins, CEO of DCT Industrial Trust Inc. (NYSE: DCT), joined REIT.com for a CEO Spotlight video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.
DCT specializes in the acquisition, development, leasing and management of bulk distribution and light industrial properties located in high-volume markets in the United States. Hawkins discussed the state of development activity at the company.
With solid market fundamentals and high demand, “it’s a great time to be building, and the risk-adjusted premiums are there. We’ve had a great run,” he said.
DCT has delivered $280 million in new development so far this year, which has stabilized at an 8.25 percent cap rate, Hawkins noted. He pointed out that this level is several hundred basis points higher than what it would be if the assets were sold.
DCT also has $250 million of new development in the pipeline, for which “leasing is going very well,” Hawkins noted.
DCT posted 10.9 percent growth in same-store net operating income (NOI) on a cash basis during the first quarter. Hawkins attributed the gains to strong tenant demand, growing rents and rising occupancy levels. Additionally, DCT has sold off assets with lower growth potential, according to Hawkins.
“We’ve got a good portfolio. We’ve spent a lot of time upgrading the portfolio over the last five years and we’ve made great acquisitions with strong growth prospects,” he said.
While Hawkins said he does not expect to be able to sustain a 10.9 percent growth rate going forward, he does “have a very positive outlook for the next several years.” That’s based on healthy demand, supply that remains in check and rents that continue to move forward, he said.
Meanwhile, the second half of 2015 is likely to be characterized by the continued appetite of private capital for industrial assets, according to Hawkins. He noted that cap rates for private industrial assets are lower than implied cap rates of publicly traded industrial REITs. “How that gap gets narrowed will be pretty interesting,” he said.
Hawkins said he is hopeful that public market pricing increases “as public REIT investors understand where values really are. That will be a key story for the rest of 2015 and probably into 2016.”