The following is from Industrial Income's Supplement 16 and describes the methodology behind new share price:
Our board of directors arbitrarily determined the offering price in its sole discretion and is ultimately and solely responsible for establishing the fixed offering price for shares of our common stock in the Follow-On Offering. We did, however, engage the services of Duff & Phelps LLC (“Duff & Phelps”), an independent valuation firm, to conduct an appraisal of all of our real estate assets that had been acquired prior to the fourth quarter of 2011. For our assets acquired during the fourth quarter of 2011, Duff & Phelps did not prepare an appraisal but did review each of those properties and concluded that the acquisition prices approximated market value.
Our board of directors also considered certain other factors, including: a discounted cash flow analysis; comparisons against certain publicly-traded industrial REITs with respect to certain operating and financial metrics including occupancy levels, leverage ratios and debt terms, and concentration of properties in top tier markets; the quality and diversity of our properties and tenant base; and the progress in executing our overall investment strategy. However, our board of directors did not consider certain other factors, such as an aggregation premium for the properties in our portfolio or a liquidity discount. Our board determined that the aggregate value of all of our real estate assets, as of December 31, 2011, is approximately $1,162,700,000 (after adjustment for our 51% ownership interest in our existing unconsolidated joint venture). Our board’s valuation for the real estate assets that had been appraised by Duff & Phelps was consistent with the Duff & Phelps’ appraisal. This compares to an original aggregate purchase price (exclusive of transfer taxes, due diligence expenses, and other closing costs) of $1,067,800,000 for these assets. Based on 60.55 million shares outstanding as of December 31, 2011, this appreciation of our real estate assets reflects an implied increase in value of approximately $1.57 per share.
For the three months ended March 31, 2010 and June 30, 2010, 100% cash distributions provided by financing activities were funded through offering proceeds. For all other periods presented, 100% cash distributions provided by financing activities were funded through proceeds from our debt financings.I hope the Industrial Income's board weighed in its valuation decision this REIT's historic inability to pay any of its distribution from operating cash flow. This is one metric I will follow in 2012.