The following Management's Discussion and Analysis of Financial Condition and
Results of Operations is intended to help the reader understand our operations
and our present business environment. Management's Discussion and Analysis is
provided as a supplement to, and should be read in conjunction with, our
consolidated financial statements and the notes thereto contained in Part I,
Item 1 of this Report, and the consolidated financial statements and notes
thereto contained in Part IV, Item 15 of our 2019 Annual Report.
Cautionary Notice Regarding Forward-Looking Statements
Certain statements contained in or incorporated by reference into this Report,
including, without limitation, those related to our future operations and those
related to our expectations concerning the effects of the COVID-19 pandemic on
our future operations and balance sheet, constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"believe," "estimate," "expect," "anticipate," "intend," "plan," "strategy,"
"continue," "seek," "may," "could" and similar expressions or statements
regarding future periods are intended to identify forward-looking statements,
although not all forward-looking statements may contain such words.
These forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause our actual results, performance or
achievements, or industry results, to differ materially from any predictions of
future results, performance or achievements that we express or imply in this
Report or in the information incorporated by reference into this Report. Some of
the risks, uncertainties and other important factors that may affect future
results include, among others:
•The impact of the COVID-19 pandemic on our business, our tenants and the
economy in general, including the measures taken by governmental authorities to
address it;
•Changes in general economic and business conditions, including the financial
condition of our tenants and the value of our real estate assets;
•The General Partner's continued qualification as a REIT for U.S. federal income
tax purposes;
•Heightened competition for tenants and potential decreases in property
occupancy;
•Potential changes in the financial markets and interest rates;
•Volatility in the General Partner's stock price and trading volume;
•Our continuing ability to raise funds on favorable terms, or at all;
•Our ability to successfully identify, acquire, develop and/or manage properties
on terms that are favorable to us;
•Potential increases in real estate construction costs including construction
cost increases as the result of trade disputes and tariffs on goods imported in
the United States;
•Our real estate asset concentration in the industrial sector and potential
volatility in this sector;
•Our ability to successfully dispose of properties on terms that are favorable
to us;
•Our ability to successfully integrate our acquired properties;
•Our ability to retain our current credit ratings;
•Inherent risks related to disruption of information technology networks and
related systems and cyber security attacks;
•Inherent risks in the real estate business, including, but not limited to,
tenant defaults, potential liability relating to environmental matters and
liquidity of real estate investments; and
•Other risks and uncertainties described herein, as well as those risks and
uncertainties discussed from time to time in our other reports and other public
filings with the Securities and Exchange Commission (the "SEC").
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Although we presently believe that the plans, expectations and anticipated
results expressed in or suggested by the forward-looking statements contained in
or incorporated by reference into this Report are reasonable, all
forward-looking statements are inherently subjective, uncertain and subject to
change, as they involve substantial risks and uncertainties, including those
beyond our control. New factors emerge from time to time, and it is not possible
for us to predict the nature, or assess the potential impact, of each new factor
on our business. Given these uncertainties, we caution you not to place undue
reliance on these forward-looking statements. We undertake no obligation to
update or revise any of our forward-looking statements for events or
circumstances that arise after the statement is made, except as otherwise may be
required by law.

The above list of risks and uncertainties is only a summary of some of the most
important factors and is not intended to be exhaustive. Additional information
regarding risk factors that may affect us is included in our 2019 Annual Report
and in Part II, Item 1A, "Risk Factors" in this Report. The risk factors
contained in our 2019 Annual Report are updated by us from time to time in
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings
that we make with the SEC.
Business Overview
The General Partner and Partnership collectively specialize in the ownership,
management and development of industrial real estate.
The General Partner is a self-administered and self-managed REIT that began
operations in 1986 and is the sole general partner of the Partnership. The
Partnership is a limited partnership formed in 1993, at which time all of the
properties and related assets and liabilities of the General Partner, as well as
proceeds from a secondary offering of the General Partner's common shares, were
contributed to the Partnership. Simultaneously, the Partnership completed the
acquisition of Duke Associates, a full-service commercial real estate firm
operating in the Midwest whose operations began in 1972. We operate the General
Partner and the Partnership as one enterprise, and therefore, our discussion and
analysis refers to the General Partner and its consolidated subsidiaries,
including the Partnership, collectively. A more complete description of our
business, and of management's philosophy and priorities, is included in our 2019
Annual Report.
At September 30, 2020, we:
•Owned or jointly controlled 529 primarily industrial properties, of which 517
properties with 151.8 million square feet were in service and 12 properties with
7.0 million square feet were under development. The 517 in-service properties
were comprised of 478 consolidated properties with 140.6 million square feet and
39 unconsolidated joint venture properties with 11.1 million square feet. The 12
properties under development consisted of 11 consolidated properties with 6.6
million square feet and one unconsolidated joint venture property with 358,000
square feet.
•Owned directly, or through ownership interests in unconsolidated joint ventures
(with acreage not adjusted for our percentage ownership interest), approximately
1,120 acres of land and controlled approximately 900 acres through purchase
options.
Our overall strategy is to continue to increase our investment in quality
industrial properties primarily through development, on both a speculative and
build-to-suit basis, supplemented with acquisitions in higher barrier markets
with the highest growth potential.

COVID-19



As the result of the COVID-19 pandemic, we have made various changes to our
operations in order to support the health and safety of our associates and the
communities in which we operate. The pandemic has had a far-reaching impact on
the global economy but the demand for industrial real estate continues to be
healthy, especially as the demand for industrial space to support e-commerce has
accelerated.
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As of September 30, 2020, we have executed deferral agreements with certain
tenants that will eventually allow for $8.1 million of total scheduled rental
payments to be deferred and repaid in future periods. The substantial majority
of these agreements require repayment of the deferred amounts within twelve
months of their execution. The tenants with whom we have executed agreements
allowing for deferral of rental payments have paid all amounts due under their
revised billing schedules through September 30, 2020.

During the third quarter of 2020, we resumed speculative development activity in
certain targeted markets based on our leasing activity to date, the resilience
of the industrial real estate sector during the COVID-19 pandemic and our belief
that we will be able to continue to lease our speculative space.

The pandemic's impact on the overall global economy is continuing and the ultimate impact is unknown at this time. Please see Part II, Item 1A, "Risk Factors" below for additional information about the potential impacts the pandemic may have on our business and results of operations.



Key Performance Indicators
Our operating results depend primarily upon rental income from our Rental
Operations. The following discussion highlights the metrics that drive the
performance of our Rental Operations, which management uses to operate the
business, and that we consider to be critical drivers of future revenues.
Occupancy Analysis
Occupancy is an important metric for management and our investors for
understanding our financial performance. Our ability to maintain high occupancy
rates is among the principal drivers of maintaining and increasing rental
revenue. The following table sets forth percent leased and average net effective
rent information regarding our in-service portfolio of rental properties at
September 30, 2020 and 2019, respectively:
                                                   Total Square Feet                                  Percent of
                                                     (in thousands)                               Total Square Feet                                  Percent Leased*                          Average Annual Net Effective Rent**
Type                                          2020                   2019                     2020                      2019                    2020                    2019                  2020                           2019
Industrial                                  140,437                135,096                           99.8  %              99.8  %                     97.0  %             96.1  %                  $5.18                          $4.90
Non-reportable Rental Operations                211                    211                            0.2  %               0.2  %                     80.5  %             77.3  %                 $24.27                         $24.76
Total Consolidated                          140,648                135,307                          100.0  %             100.0  %                     97.0  %             96.0  %                  $5.21                          $4.93
Unconsolidated Joint Ventures                11,109                 12,656                                                                            97.5  %             97.6  %                  $4.26

$4.10


Total Including Unconsolidated Joint
Ventures                                    151,757                147,963                                                                            97.0  %             96.2  %

* Represents the percentage of total square feet leased based on executed leases and without regard to whether the leases have commenced. **Average annual net effective rent represents average annual base rental payments per leased square foot, on a straight-line basis for the term of each lease, from space leased to tenants at the end of the most recent reporting period. This amount excludes additional amounts paid by tenants as reimbursement for operating expenses.

The higher leased percentage in our industrial portfolio at September 30, 2020, compared to September 30, 2019, was due to leasing up speculative developments.


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Vacancy Activity
The following table sets forth vacancy activity, shown in square feet, from our
in-service rental properties for the nine months ended September 30, 2020 (in
thousands):
                                                                              Unconsolidated Joint           Total Including Unconsolidated
                                        Consolidated Properties                Venture Properties               Joint Venture Properties
Vacant square feet at December 31,
2019                                                 4,540                                  406                                 4,946

 Vacant space in completed
developments                                         1,138                                    -                                 1,138

 Expirations                                         2,697                                  299                                 2,996
 Early lease terminations                            1,448                                    -                                 1,448
 Property structural changes/other                      14                                    -                                    14
 Leasing of previously vacant space                 (5,607)                                (430)                               (6,037)
Vacant square feet at September 30,
2020                                                 4,230                                  275                                 4,505



Total Leasing Activity
Our ability to maintain and improve occupancy and net effective rents primarily
depends upon our continuing ability to lease vacant space. The volume and
quality of our leasing activity is closely scrutinized by management in
operation of the business and provides useful information regarding future
performance. The initial leasing of development projects or vacant space in
acquired properties is referred to as first generation lease activity. The
leasing of such space that we have previously held under lease to a tenant is
referred to as second generation lease activity. Second generation lease
activity may be in the form of renewals of existing leases or new second
generation leases of previously leased space. The total leasing activity for our
consolidated and unconsolidated industrial rental properties, expressed in
square feet of leases signed, is as follows (in thousands):
                                                     Three Months Ended September 30,                       Nine Months Ended September 30,
                                                    2020                            2019                  2020                            2019
New Leasing Activity - First Generation                   2,406                         2,111                   5,440                         6,775
New Leasing Activity - Second Generation                  1,405                           984                   2,978                         1,841
Renewal Leasing Activity                                    899                         3,131                   3,494                         7,717
Early Renewal Leasing Activity *                          1,265                           148                   2,576                         2,063
Short-Term New Leasing Activity **                          125                           216                   1,194                           924
Short-Term Renewal Leasing Activity **                      677                             -                   1,615                           619
Non-Reportable Rental Operations Leasing
Activity                                                      -                             3                       1                             4
Total Consolidated Leasing Activity                       6,777                         6,593                  17,298                        19,943
Unconsolidated Joint Venture Leasing Activity               561                         1,832                   1,689                         2,042
Total Including Unconsolidated Joint Venture
Leasing Activity                                          7,338                         8,425                  18,987                        21,985

* Early renewals represent renewals executed more than two years in advance of a lease's originally scheduled end date. ** Short-term leases represent leases with a term of less than twelve months.


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Second Generation Leases
The following table sets forth the estimated costs of tenant improvements and
leasing commissions, on a per square foot basis, that we are obligated to
fulfill under the second generation industrial leases signed for our rental
properties during the three and nine months ended September 30, 2020 and 2019:
                                       Square Feet of Leases                   Percent of Expiring Leases
                                           (in thousands)                               Renewed                          Average Term in Years                          Estimated Tenant Improvement Cost per Square Foot                    Leasing Costs per Square Foot
                                   2020                     2019                2020                2019              2020                    2019                                                                  2020                    2019                         2020              2019
Three Months
Consolidated - New Second
Generation                       1,405                         984                                                         6.4                    5.5                                                                      $1.78                $2.21                       $3.76            $2.10
Unconsolidated Joint Ventures
- New Second Generation            257                          49                                                         1.0                   10.2                                                                          -                $3.49                       $0.38            $4.57
Total - New Second Generation    1,662                       1,033                                                         5.6                    5.7                                                                      $1.51                $2.27                       $3.23            $2.22

Consolidated - Renewal             899                       3,131                42.3  %            82.2  %               3.5                    4.3                                                                      $0.72                $0.46                       $0.92            $1.14
Unconsolidated Joint Ventures
- Renewal                          131                         459               100.0  %            90.3  %               1.0                    5.9                                                                          -                $0.95                       $0.29            $2.29
Total - Renewal                  1,030                       3,590                45.7  %            83.1  %               3.2                    4.5                                                                      $0.63                $0.52                       $0.84            $1.29

Nine Months
Consolidated - New Second
Generation                       2,978                       1,841                                                         5.2                    5.7                                                                      $2.02                $2.75                       $2.79            $2.22
Unconsolidated Joint Ventures
- New Second Generation            257                         165                                                         1.0                    7.2                                                                          -                $1.82                       $0.38            $2.75
Total - New Second Generation    3,235                       2,006                                                         4.8                    5.8                                                                      $1.87                $2.67                       $2.60            $2.26

Consolidated - Renewal           3,494                       7,717                59.9  %            82.3  %               4.6                    4.4                                                                      $1.01                $0.71                       $1.45            $1.30
Unconsolidated Joint Ventures
- Renewal                          628                         554                90.2  %            85.6  %               3.7                    6.0                                                                      $0.38                $0.92                       $1.42            $2.32
Total - Renewal                  4,122                       8,271                63.2  %            82.5  %               4.5                    4.5                                                                      $0.91                $0.72                       $1.45            $1.37

Growth in average annual net effective rents for new second generation and renewal leases, on a combined basis, for our consolidated and unconsolidated industrial rental properties, is as follows:


                                                 Three Months Ended September 30,               Nine Months Ended September 30,
Ownership Type                                      2020                   2019                   2020                   2019
Consolidated properties                                 32.3  %               22.5  %                 28.9  %               25.0  %
Unconsolidated joint venture properties                 29.5  %               44.9  %                 39.0  %               38.2  %


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