INVESTORS
Approaching three decades as a public company focused on top U.S. markets
Press Release
First Industrial Realty Trust Reports Fourth Quarter and Full Year 2005 Results
Feb 22, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- First Industrial Realty Trust, Inc. (NYSE: FR), the nation's largest provider of diversified industrial real estate, today announced results for fourth quarter and full year 2005. Diluted net income available to common stockholders per share (EPS) was $0.51 in the fourth quarter compared to $0.42 in fourth quarter 2004. For full year 2005, diluted net income available to common stockholders was $1.80 per share compared to $2.16 per share in 2004.
Fourth quarter funds from operations (FFO) grew 18% to $0.99 per share/unit on a diluted basis from $0.84 per share/unit a year ago. For full year 2005, FFO grew to $3.61 per share/unit on a diluted basis from $3.53 per share/unit in 2004.
"The growth of our organization in 2005 is expected to drive double-digit growth in funds from operations in 2006," said Mike Brennan, president and CEO. "A $2 billion increase in joint venture capital, the entrance into new markets and growth in our investment personnel drove record investments in 2005. Assets under management rose 42% and business with Corporate America, our most important target market, climbed 63% percent as First Industrial delivered more supply chain solutions to more customers." Mr. Brennan added, "We have a talented team of investment, capital markets, portfolio management and sales professionals all dedicated to creating value for customers, which in turn, will create value for shareholders."
Portfolio Performance for On Balance Sheet Properties
- Occupancy grew to 92.4%, up from 91.6% in third quarter 2005 and 90.1% at year-end 2004
- Leased 5.3 million square feet during the quarter
- Retained tenants in 61.9% of square footage up for renewal during the quarter; retention averaged 73.6% for the year
- Same property net operating income (NOI) decreased 3.4% for the quarter and averaged -1.2% for the year
Investment Performance: Fourth Quarter 2005
Balance Sheet Investment/Disposition Activity (in millions)
Property Acquisitions $332.9
Square Feet 8.1 million
Stabilized Weighted Average
Capitalization Rate 9.2%
Developments Placed In Service $80.9
Square Feet 1.0 million
Expected Weighted Average
First-Year Stabilized Yield 10.0%
Land Acquisitions $3.9
Total Investment $417.7
Property Sales $175.1
Square Feet 3.8 million
Weighted Average Capitalization Rate 7.3%
Land Sales $8.7
Total Sales $183.8
Joint Venture Investment/Disposition Activity
Joint Venture Investments
FirstCal Industrial 1 (Development/Repositioning) $63.8
Joint Venture Dispositions
FirstCal Industrial 1 (Development/Repositioning) $4.5
FirstCal Industrial 2 (Core) $7.8
Total Joint Venture Dispositions $12.3
"On the strength of our national platform, First Industrial was able to identify and complete record investments for the balance sheet and joint ventures in 2005," said Johannson Yap, chief investment officer. "We also have a sizeable pipeline of new investment opportunities that we are sourcing through a growing number of channels."
Acquisitions Completed Year-to-Date 2006 and Pipeline
Year-to-date in 2006, $155 million of acquisitions have already been completed, which combined with developments currently and soon to be under construction of $355 million and acquisitions under agreement of $391 million, total $901 million. The breakdown is as follows:
(millions) Balance Sheet Joint Ventures Total
Developments $264 $91 $355
Acquisitions $261 $285 $546
Total $525 $376 $901
Solid Financial Position
- Fixed-charge coverage was 2.6 times and interest coverage was 2.9 times for the year
- 96.9% of the Company's real estate assets are unencumbered by mortgages
- The weighted average maturity of permanent debt at the end of the quarter was 8.7 years
- 100% of the Company's permanent debt is fixed rate
"During 2005, we increased the capital base in our joint ventures and on our balance sheet by $2.5 billion, or more than 60%," said Mike Havala, chief financial officer. "This significant increase gives First Industrial the resources to drive higher earnings growth by investing in more real estate with more competitive capital, increasing returns for our shareholders."
Supplemental Reporting Measure
First Industrial defines FFO as net income available to common stockholders, plus depreciation and amortization of real estate, minus accumulated depreciation and amortization on real estate sold.
The National Association of Real Estate Investment Trusts ("NAREIT") has provided a recommendation on how real estate investment trusts (REITs) should define funds from operations ("FFO"). NAREIT suggests that FFO be defined as net income, excluding gains (or losses) from the sale of previously depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
NAREIT has also clarified that non-recurring charges and gains should be included in FFO.
Importantly, as part of its guidance concerning FFO, NAREIT has stated that the "management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community." As a result, modifications to the NAREIT calculation of FFO are common among REITs.
First Industrial calculates FFO to include all cash gains and losses on all industrial property sales whether depreciation is or is not accumulated under the GAAP accounting rules. The Company believes that FFO inclusive of all cash gains and losses is a better performance measure because it reflects all the activities of the Company and better reflects the Company's strategy, which includes investing in real estate; adding value through redevelopment, leasing and repositioning; and then selling the improved real estate in order to maximize investment returns. The Company provides additional disclosure on net economic gains in its quarterly supplemental.
Outlook for 2006
Mr. Brennan stated, "Demand for industrial real estate is growing as customers seek quality industrial properties for their supply chain networks. We are well-positioned to meet this growing demand through our national portfolio and our development and redevelopment capabilities."
Mr. Brennan added, "First Industrial's 2006 guidance range is $3.90 to $4.10 for FFO per share/unit and $2.10 to $2.30 for EPS. On balance sheet investment volume assumptions for 2006, which include both developments placed in service and acquisitions, range from $600 million to $700 million with an 8% to 9% average cap rate. On balance sheet sales volume in 2006 is assumed to be $700 million to $800 million with a 7% to 8% average cap rate. Book gains from property sales/fees are estimated to be $150 million to $170 million. Our assumption for net economic gains for on balance sheet transactions in 2006 is between $100 million and $120 million.
"Our estimate for First Industrial's FFO from joint ventures in 2006 is between $30 million and $35 million, which includes fees, incentive payments and the prorata share of operations and net economic gain. Joint venture investment volume assumptions for 2006, which include both new developments and acquisitions, range from $800 million to $900 million. Joint venture sales volume in 2006 is assumed to be approximately $450 million to $550 million."
Low End High End
of of Low End High End
Guidance Guidance of of
for for Guidance Guidance
1Q 2006 1Q 2006 for 2006 for 2006
(Per (Per (Per (Per
share/ share/ share/ share/
unit unit unit unit
Net Income Available to Common
Stockholders $0.42 $0.52 $2.10 $2.30
Add: Real Estate
Depreciation/Amortization 0.70 0.70 2.80 2.80
Less: Accumulated
Depreciation/Amortization on
Real Estate Sold (0.25) (0.25) (1.00) (1.00)
FFO $0.87 $0.97 $3.90 $4.10
Mr. Brennan continued, "A number of factors could impact our ability to deliver results in line with our assumptions, such as interest rates, the overall economy, the supply and demand of industrial real estate, the timing and yields for divestment and investment, and numerous other variables. There can be no assurance that First Industrial can achieve such results for 2006. However, I believe that First Industrial has the proper strategy, infrastructure, and capabilities to deliver such results."
First Industrial Realty Trust, Inc., the nation's largest provider of diversified industrial real estate, serves every aspect of Corporate America's industrial real estate needs, including customized supply chain solutions, through its unique I-N-D-L operating platform, which utilizes a pure Industrial focus and National scope to provide Diverse facility types, while offering Local, full-service management and expertise. The Company owns, operates and has under development more than 100 million square feet of industrial real estate in markets throughout the United States. Building, buying, selling, leasing and managing industrial property in major markets nationwide, First Industrial develops long-term relationships with corporate real estate directors, tenants and brokers to better serve customers with creative, flexible industrial real estate solutions.
This press release contains forward-looking information about the Company. A number of factors could cause the Company's actual results to differ materially from those anticipated, including changes in: economic conditions generally and the real estate market specifically, legislative/regulatory changes (including changes to laws governing the taxation of real estate investment trusts), availability of financing, interest rate levels, competition, supply and demand for industrial properties in the Company's current and proposed market areas, potential environmental liabilities, slippage in development or lease-up schedules, tenant credit risks, higher- than-expected costs and changes in general accounting principles, policies and guidelines applicable to real estate investment trusts. For further information on these and other factors that could impact the Company and the statements contained herein, reference should be made to the Company's filings with the Securities and Exchange Commission.
A schedule of selected financial information is attached.
First Industrial Realty Trust, Inc. will host a quarterly conference call at 11:00 a.m. Central time, 12:00 p.m. Eastern time, on Wednesday, February 22, 2006. The call-in number is (800) 865-4460 and the passcode is "First Industrial." The conference call will also be webcast live on First Industrial's web site, http://www.firstindustrial.com , under the "Investor Relations" tab. Replay will also be available on the web site.
The Company's fourth quarter supplemental information can be viewed on First Industrial's website, http://www.firstindustrial.com , under the "Investor Relations" tab.
FIRST INDUSTRIAL REALTY TRUST, INC.
Selected Financial Data
(In thousands, except for per share/unit and property data)
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
Statement of Operations and
Other Data:
Total Revenues $105,432 $79,676 $367,129 $296,701
Property Expenses (34,485) (26,653) (121,784) (99,889)
Build to Suit For Sale
Costs (5,119) - (15,574) -
General & Administrative
Expense (16,937) (11,491) (55,812) (39,569)
Amortization of
Deferred Financing
Costs (565) (510) (2,125) (1,931)
Depreciation of
Corporate F,F&E (371) (315) (1,371) (1,280)
Depreciation and
Amortization of Real
Estate (35,355) (24,439) (118,237) (86,671)
Total Expenses (92,832) (63,408) (314,903) (229,340)
Interest Income 430 780 1,486 3,632
Interest Expense (29,233) (25,545) (108,339) (98,636)
(Loss) Gain from the Early
Retirement of Debt - (515) 82 (515)
Mark-to-Market / Gain
on Settlement of
Interest Rate
Protection Agreement (a) 62 133 811 1,583
Loss from Continuing
Operations Before
Equity in Net (Loss)
Income of Joint Ventures,
Income Tax Benefit, and
Minority Interest
Allocable to Continuing
Operations (16,141) (8,879) (53,734) (26,575)
Equity in Net (Loss) Income
of Joint Ventures (b) (59) (8) 3,699 37,301
Income Tax Benefit 4,249 3,930 12,033 7,673
Minority Interest
Allocable to Continuing
Operations 2,057 1,045 6,348 547
(Loss) Income from
Continuing Operations (9,894) (3,912) (31,654) 18,946
Income from Discontinued
Operations (Including
Gain on Sale of Real
Estate of $46,219 and
$23,002 for the Three
Months Ended December 31,
2005 and 2004, respectively
and $131,955 and
$88,245 for the Year Ended
December 31, 2005 and 2004,
respectively (c) 47,035 27,026 139,486 105,592
Provision for Income
Taxes Allocable to
Discontinued Operations
(Including a provision
allocable to Gain on
Sale of Real Estate of
$7,823 and $3,186 for
the Three Months Ended
December 31, 2005 and 2004,
respectively and $19,933
and $8,267 for the Year
Ended December 31, 2005
and 2004, respectively) (8,106) (3,919) (21,754) (10,800)
Minority Interest
Allocable to
Discontinued
Operations (c) (5,146) (3,052) (15,494) (13,005)
Income Before Gain on
Sale of Real Estate 23,889 16,143 70,584 100,733
Gain on Sale of Real
Estate 2,401 7,259 29,734 16,755
Provision for Income
Taxes Allocable to
Gain on Sale of Real
Estate (586) (2,995) (10,711) (5,312)
Minority Interest
Allocable to Gain on
Sale of Real Estate (240) (564) (2,503) (1,570)
Net Income 25,464 19,843 87,104 110,606
Preferred Dividends (3,758) (2,310) (10,688) (14,488)
Redemption of Preferred
Stock - - - (7,959)
Net Income Available
to Common Stockholders $21,706 $17,533 $76,416 $88,159
RECONCILIATION OF NET INCOME
AVAILABLE TO COMMON
STOCKHOLDERS TO FFO (d)
AND FAD (d)
Net Income Available
to Common Stockholders $21,706 $17,533 $76,416 $88,159
Add: Depreciation and
Amortization of
Real Estate 35,355 24,439 118,237 86,671
Add: Depreciation and
Amortization of
Real Estate Included
in Discontinued
Operations 1,189 2,922 8,393 12,595
Add: Income Allocated
to Minority Interest 3,329 2,571 11,649 14,028
Add: Depreciation and
Amortization of Real
Estate - Joint
Ventures (b) 2,356 307 3,976 3,893
Less: Accumulated Depreciation/
Amortization on Real
Estate Sold (14,911) (7,287) (41,807) (32,189)
Less: Accumulated Depreciation/
Amortization on Real
Estate Sold - Joint
Ventures (b) (9) (21) (9) (5,766)
Funds From Operations
("FFO") (d) $49,015 $40,464 $176,855 $167,391
Add: Loss (Gain) from Early
Retirement of Debt - 515 (82) 515
Add: Restricted Stock
Amortization 1,913 1,813 8,845 6,866
Add: Amortization of
Deferred Financing
Costs 565 510 2,125 1,931
Add: Depreciation of
Corporate F,F&E 371 315 1,371 1,280
Add: Redemption of
Preferred Stock - - - 7,959
Less: Non-Incremental Capital
Expenditures (10,761) (12,829) (42,867) (40,772)
Less: Straight-Line Rent (2,965) (2,270) (9,460) (6,742)
Funds Available for
Distribution ("FAD")(d) $38,138 $28,518 $136,787 $138,428
FIRST INDUSTRIAL REALTY TRUST, INC.
Selected Financial Data
(In thousands, except for per share/unit and
property data)
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
RECONCILIATION OF NET INCOME
AVAILABLE TO COMMON STOCKHOLDERS
TO EBITDA (d) AND NOI (d)
Net Income Available to
Common Stockholders $21,706 $17,533 $76,416 $88,159
Add: Interest Expense 29,233 25,545 108,339 98,636
Add: Interest Expense
Included in
Discontinued
Operations - 216 373 609
Add: Depreciation and
Amortization of
Real Estate 35,355 24,439 118,237 86,671
Add: Depreciation and
Amortization of
Real Estate Included
in Discontinued
Operations 1,189 2,922 8,393 12,595
Add: Preferred Dividends 3,758 2,310 10,688 14,488
Add: Redemption of
Preferred Stock - - - 7,959
Add: Provision for Income
Taxes 4,443 2,984 20,432 8,439
Add: Income Allocated
to Minority Interest 3,329 2,571 11,649 14,028
Add: Loss (Gain) from Early
Retirement of Debt - 515 (82) 515
Add: Amortization of
Deferred Financing
Costs 565 510 2,125 1,931
Add: Depreciation of
Corporate F,F&E 371 315 1,371 1,280
Add: Depreciation and
Amortization of Real
Estate - Joint Ventures
(b) 2,356 307 3,976 3,893
Less: Accumulated Depreciation/
Amortization on Real
Estate Sold - Joint
Ventures (b) (9) (21) (9) (5,766)
Less: Accumulated Depreciation/
Amortization on Real
Estate Sold (14,911) (7,287) (41,807) (32,189)
EBITDA (d) $87,385 $72,859 $320,101 $301,248
Add: General and
Administrative Expense 16,937 11,491 55,812 39,569
Less: Net Economic
Gains (29,612) (19,990) (100,646) (77,741)
Less: Provision for
Income Taxes (4,443) (2,984) (20,432) (8,439)
Less: Equity in FFO of
Joint Ventures (b) (5,191) (636) (14,771) (24,606)
Net Operating Income
("NOI") (d) $65,076 $60,740 $240,064 $230,031
Weighted Avg. Number of
Shares/Units Outstanding-
Basic 49,436 48,400 48,968 47,136
Weighted Avg. Number of
Shares/Units Outstanding-
Diluted (e) 49,436 48,400 48,968 47,467
Weighted Avg. Number of
Shares Outstanding- Basic 42,806 41,899 42,431 40,557
Weighted Avg. Number of
Shares Outstanding-
Diluted (e) 42,806 41,899 42,431 40,888
Per Share/Unit Data:
FFO:
- Basic $0.99 $0.84 $3.61 $3.55
- Diluted (e) $0.99 $0.84 $3.61 $3.53
(Loss) Income from Continuing
Operations Less Preferred
Stock Dividends Per Weighted
Average Common Share
Outstanding:
- Basic $(0.28) $(0.06) $(0.61) $0.16
- Diluted (e) $(0.28) $(0.06) $(0.61) $0.16
Net Income Available
to Common Stockholders
Per Weighted Average
Common Share Outstanding:
- Basic $0.51 $0.42 $1.80 $2.17
- Diluted (e) $0.51 $0.42 $1.80 $2.16
Dividends/Distributions $0.7000 $0.6950 $2.7850 $2.7500
FFO Payout Ratio 70.6% 83.1% 77.1% 77.4%
FAD Payout Ratio 90.7% 118.0% 99.7% 93.6%
Balance Sheet Data (end of
period):
Real Estate Before
Accumulated
Depreciation $3,260,761 $2,856,474
Real Estate Held For
Sale, Net 16,840 52,790
Total Assets 3,226,243 2,721,890
Debt 1,813,702 1,574,929
Total Liabilities 2,020,361 1,719,463
Stockholders' Equity
and Minority Interest $1,205,882 $1,002,427
Property Data (end of
period):
Total In-Service
Properties 884 827
Total Gross Leasable
Area (in sq ft) 70,193,161 61,670,735
Occupancy 92.4% 90.1%
a) Represents the mark to market of an interest rate protection agreement
used to hedge a prospective transaction that does not qualify for hedge
accounting in accordance with Statement of Financial Accounting
Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities".
In March 2004, the Company entered into an interest rate protection
agreement that fixed the interest rate on a forecasted offering of
unsecured debt, which it designated as a cash flow hedge. This
interest rate protection agreement had a notional value of $73,500, was
effective from August 15, 2004 through August 15, 2009, and fixed the
LIBOR swap rate at 3.326%. In May 2004, the Company reduced the
projected amount of the future debt offering and settled $24,500 of
this interest rate protection agreement for proceeds in the amount of
$1,450.
In November 2004, the Company entered into an interest rate protection
agreement that fixed the interest rate on a forecasted offering of
unsecured debt, which it designated as a cash flow hedge. This
interest rate protection agreement had a notional value of $48,980, was
effective from January 10, 2005 through January 10, 2010 and fixed the
LIBOR swap rate at 3.909%. The $133 recognized in 4Q 2004 represents
the ineffective portion of this interest rate protection agreement.
b) Represents the Company's share of net income, depreciation and
amortization of real estate and accumulated depreciation and
amortization on real estate sold from the Company's joint ventures in
which it owns minority equity interests.
c) In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("FAS 144"). FAS 144
requires that the operations and gain (loss) on sale of qualifying
properties sold and properties that are classified as held for sale be
presented in discontinued operations. FAS 144 also requires that prior
periods be restated.
d) Investors in and analysts following the real estate industry utilize
FFO, NOI, EBITDA and FAD, variously defined, as supplemental
performance measures. While the Company believes net income available
to common stockholders, as defined by GAAP, is the most appropriate
measure, it considers FFO, NOI, EBITDA and FAD, given their wide use by
and relevance to investors and analysts, appropriate supplemental
performance measures. FFO, reflecting the assumption that real estate
asset values rise or fall with market conditions, principally adjusts
for the effects of GAAP depreciation and amortization of real estate
assets. NOI provides a measure of rental operations, and does not
factor in depreciation and amortization and non-property specific
expenses such as general and administrative expenses. EBITDA provides
a tool to further evaluate the ability to incur and service debt and to
fund dividends and other cash needs. FAD provides a tool to further
evaluate the ability to fund dividends. In addition, FFO, NOI, EBITDA
and FAD are commonly used in various ratios, pricing multiples/yields
and returns and valuation calculations used to measure financial
position, performance and value.
The Company calculates FFO to be equal to net income available to
common stockholders, plus depreciation and amortization on real estate,
minus accumulated depreciation and amortization on real estate sold.
NOI is defined as revenues of the Company, minus property expenses
such as real estate taxes, repairs and maintenance, property
management, utilities, insurance and other expenses. NOI includes NOI
from discontinued operations.
EBITDA is defined as NOI, plus the equity in FFO of the Company's joint
ventures, which are accounted for under the equity method of
accounting, plus Net Economic Gains, minus general and administrative
expenses. Net Economic Gains equal the gain on sale of real estate and
the gain on sale of real estate from discontinued operations less
accumulated depreciation and amortization on real estate sold
(excluding the recapture of accumulated amortization related to
above/below market leases as this amortization is included in revenues
and FFO) and provision for income taxes/income tax benefit. EBITDA
includes EBITDA from discontinued operations.
FAD is defined as EBITDA, minus GAAP interest expense, minus preferred
stock dividends, minus preferred stock redemption costs, minus
straight-line rental income, minus provision for income taxes, plus
restricted stock amortization, minus non-incremental capital
expenditures. Non-incremental capital expenditures are building
improvements and leasing costs required to maintain current revenues.
FFO, NOI, EBITDA and FAD do not represent cash generated from operating
activities in accordance with GAAP and are not necessarily indicative
of cash available to fund cash needs, including the repayment of
principal on debt and payment of dividends and distributions. FFO,
NOI, EBITDA and FAD should not be considered as substitutes for net
income available to common stockholders (calculated in accordance with
GAAP), as a measure of results of operations, or cash flows (calculated
in accordance with GAAP) as a measure of liquidity. FFO, NOI, EBITDA
and FAD, as calculated by the Company, may not be comparable to
similarly titled, but variously calculated, measures of other REITs or
to the definition of FFO published by NAREIT.
e) Pursuant to Statement of Financial Accounting Standard No. 128,
"Earnings Per Share", the diluted weighted average number of
shares/units outstanding and the diluted weighted average number of
shares outstanding are the same as the basic weighted average number of
shares/units outstanding and the basic weighted average number of
shares outstanding, respectively, for periods in which continuing
operations is a loss, as the dilutive effect of stock options and
restricted stock would be antidilutive to the loss from continuing
operations per share.
SOURCE First Industrial Realty Trust, Inc.
Sean P. O'Neill, SVP, Investor Relations and Corporate Communications, +1-312-344-4401, or Art Harmon, Sr. Manager, Investor Relations and Corporate Communications, +1-312-344-4320, both of First Industrial Realty Trust, Inc.