INVESTORS
Approaching three decades as a public company focused on top U.S. markets
Press Release
First Industrial Realty Trust Reports Third Quarter 2006 Results
- Strong Portfolio Results From Higher Occupancy and Rental Rates
- Joint Venture Income Continues To Rise
- Formed $950 Million Strategic Land and Development Joint Venture
- Record Developments Placed in Service
First Industrial Realty Trust, Inc. (NYSE: FR), the nation's largest provider of diversified industrial real estate, today announced results for the quarter ended September 30, 2006. Diluted net income available to common stockholders per share (EPS) was $0.54 in the third quarter, up 8% compared to third quarter 2005. Funds from operations (FFO) grew to $1.00 per share/unit on a diluted basis from $0.95 per share/unit a year ago.
"Third quarter financial results reflect our success in serving the growing supply chain needs of corporate customers through an expanded First Industrial franchise," said Mike Brennan, president and CEO. "Net operating income grew 13% largely due to higher occupancy and rental rates, as well as an increase in the size of the portfolio. During the quarter, we placed in service more than 3 million square feet of new industrial space for our customers in eight facilities. We plan to ramp up our development activity even further as demand for industrial real estate rises with increasing imports of containerized cargo."
Portfolio Performance for On Balance Sheet Properties
- Occupancy rose to 93.1%, up 90 basis points from 92.2% in second quarter 2006
- Retained tenants in 85.7% of square footage up for renewal during the quarter
- Same property net operating income (NOI) increased 3.1% on a cash basis excluding lease termination fees and 0.8% on a GAAP basis
- Rental rates turned positive in the quarter, increasing 1.5%
- Leased 8.7 million square feet
Investment Performance (in millions, except percentages)
Balance Sheet Investment/Disposition
Activity Third Qtr. Nine Months
2006 2006
Property Acquisitions $194.1 $433.4
Square Feet 3.2 7.7
Stabilized Weighted Average
Capitalization Rate 8.8% 8.6%
Developments Placed In Service $110.1 $197.1
Square Feet 3.1 4.6
Expected Weighted Average
First-Year Stabilized Yield 8.5% 8.3%
Land Acquisitions $17.7 $31.2
Total Investment $321.9 $661.7
Property Sales $253.0 $739.5
Square Feet 5.9 14.3
Weighted Average Capitalization
Rate 7.0% 7.0%
Land Sales $8.2 $19.9
Total Sales $261.2 $759.4
Joint Venture Investment/Disposition
Activity
Joint Venture Investments
2005 Development/Redevelopment JV $123.6 $227.4
Net Lease (2006 and 2003) JV 90.3 341.8
2005 Core JV 7.8 7.8
Total Joint Venture Investments $221.7 $577.0
Joint Venture Dispositions
2005 Development/Redevelopment JV $38.2 $157.0
2005 Core JV 84.9 227.8
Total Joint Venture Dispositions $123.1 $384.8
"Our investment pipeline is $1.5 billion including acquisition, development and redevelopment opportunities across more than thirty markets and multiple industrial facility types," said Johannson Yap, chief investment officer. "We expect a majority of our investments to be in major coastal and inland ports and markets that are projected to have above average population growth."
Investment Pipeline and Fourth Quarter To Date Investments
Fourth quarter to date, $84 million of acquisitions have already been completed, which combined with developments currently under construction and under agreement/letter of intent of $603 million and acquisitions under agreement/letter of intent of $772 million, total $1.5 billion. The breakdown is as follows:
(millions) Balance Sheet Joint Ventures Total
Developments $330 $273 $603
Acquisitions $282 $574 $856
Total $612 $847 $1,459
Solid Financial Position
- Fixed-charge coverage improved to 2.9 times and interest coverage improved to 3.5 times for the quarter
- 97.2% of real estate assets are unencumbered by mortgages
- 7.9 years weighted average maturity of permanent debt
- 100% of permanent debt is fixed rate
"Joint ventures contributed to our success in the third quarter and we expect to further increase investment and income from our ventures, complementing our balance sheet portfolio," said Mike Havala, chief financial officer. "During the quarter, we formed a new $950 million strategic land and development joint venture with CalSTRS that will support our future growth plans."
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 (re)development, 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.
2006 and 2007 Outlook
Mr. Brennan stated, "As First Industrial executes on its strategy of providing industrial real estate solutions by leveraging our capital base, customer service focus, local market knowledge and expertise across all real estate disciplines, we can create value for our customers and our shareholders."
Mr. Brennan added, "First Industrial's guidance range for 2006 FFO per share/unit is $4.07 to $4.17 and for 2006 EPS is $2.04 to $2.14 per share/unit. On balance sheet investment volume assumptions for 2006, which include both developments placed in service and acquisitions, range from $750 million to $850 million with an 8% to 9% average cap rate. On balance sheet sales volume in 2006 is assumed to be $850 million to $950 million with a 7% to 8% average cap rate. Book gains from property sales/fees are estimated to be $175 million to $180 million. Our assumption for net economic gains in 2006 is between $115 million and $120 million.
"Our estimate for First Industrial's FFO from joint ventures in 2006 is between $47 million and $52 million, which includes fees, incentive payments and the pro rata share of operations and net economic gain. Joint venture investment volume assumptions for 2006, which include both developments placed in service and acquisitions, range from $700 million to $900 million. Joint venture sales volume in 2006 is assumed to be approximately $550 million to $650 million."
Low End High End Low End High End
of Guidance of Guidance of Guidance of Guidance
for 4Q 2006 for 4Q 2006 for 2006 for 2006
(Per share/ (Per share/ (Per share/ (Per share/
unit) unit) unit) unit)
Net Income Available
to Common Stockholders $0.47 $0.57 $2.04 $2.14
Add: Real Estate
Depreciation/
Amortization 0.77 0.77 3.19 3.19
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold (0.27) (0.27) (1.16) (1.16)
Funds From Operations
(FFO) $0.97 $1.07 $4.07 $4.17
Mr. Brennan continued, "First Industrial's guidance for 2007 FFO per share/unit is in the range of $4.40 to $4.60, and for 2007 EPS is in the range of $2.30 to $2.50. On balance sheet investment volume assumptions for 2007, which include both developments placed in service and acquisitions, range from $750 million to $850 million with an 8% to 9% average cap rate. On balance sheet sales volume in 2007 is assumed to be approximately $850 million to $950 million with a 7% to 8% average cap rate. Book gains from property sales/fees are estimated to be $170 million to $180 million. Our assumption for net economic gains in 2007 is between $120 million and $130 million.
"Our assumption for First Industrial's FFO from joint ventures in 2007 is between $50 million and $55 million, which includes fees, incentive payments and the pro rata share of operations and net economic gain. Joint venture investment volume assumptions for 2007, which include both new developments and acquisitions, range from $1.2 billion to $1.3 billion. Joint venture sales volume in 2007 is assumed to be approximately $800 million to $900 million."
A reconciliation of estimated net income available to common stockholders
to FFO follows.
Low End of High End of
Guidance for 2007 Guidance for 2007
(Per share/unit) (Per share/unit)
Net Income Available to Common
Stockholders $2.30 $2.50
Add: Real Estate
Depreciation/Amortization 3.10 3.10
Less: Accumulated
Depreciation/Amortization on
Real Estate Sold (1.00) (1.00)
Funds From Operations (FFO) $4.40 $4.60
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 or 2007. However, I believe that First Industrial has the proper strategy and tactical plans 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 and the conference call to which it refers contain 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 Thursday, October 26, 2006. The call-in number is (888) 693-3477 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. A replay will also be available on the web site or by telephone at (877) 519-4471, passcode 8007070.
The Company's first 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 Nine Months Ended
September September September September
30, 30, 30, 30,
2006 2005 2006 2005
Statement of Operations and
Other Data:
Total Revenues $103,100 $91,327 $296,126 $242,005
Property Expenses (34,083) (28,203) (99,273) (80,835)
Build to Suit For Sale Costs - (10,455) (666) (10,455)
General & Administrative
Expense (20,047) (15,382) (55,918) (38,875)
Depreciation of Corporate
F,F&E (477) (343) (1,341) (1,000)
Depreciation and Amortization
of Real Estate (37,859) (28,957) (110,017) (76,972)
Total Expenses (92,466) (83,340) (267,215) (208,137)
Interest Income 446 219 1,345 1,056
Interest Expense (31,622) (27,413) (90,853) (79,106)
Amortization of Deferred
Financing Costs (603) (541) (1,826) (1,560)
Mark-to-Market/Loss on
Settlement of Interest Rate
Protection Agreements (a) (2,942) 1,212 (3,112) 749
Gain from early Retirement
of Debt - 82 - 82
Loss from Continuing
Operations Before Equity
in Net Income (Loss) of
Joint Ventures, Income Tax
Benefit and Minority
Interest Allocable to
Continuing Operations (24,087) (18,454) (65,535) (44,911)
Equity in Net Income of Joint
Ventures (b) 4,747 3,978 12,019 3,758
Income Tax Benefit 3,465 3,245 9,779 8,014
Minority Interest Allocable
to Continuing Operations 2,751 1,785 7,779 5,227
Loss from Continuing
Operations (13,124) (9,446) (35,958) (27,912)
Income from Discontinued
Operations (Including Gain on
Sale of Real Estate of $65,368
and $38,552 for the Three
Months Ended September 30, 2006
and 2005, respectively and
$171,390 and $85,734 for the
Nine Months Ended September 30,
2006 and 2005, respectively
(c)) 67,453 43,247 177,884 99,768
Provision for Income Taxes
Allocable to Discontinued
Operations (Including a
provision allocable to Gain
on Sale of Real Estate of
$19,427 and $5,943 for the
Three Months Ended September
30, 2006 and 2005,
respectively and $41,340 and
$11,349 for the Nine Months
Ended September 30, 2006 and
2005, respectively) (20,143) (6,957) (43,298) (14,070)
Minority Interest Allocable to
Discontinued Operations (c) (6,145) (4,794) (17,577) (11,261)
Income Before Gain on Sale
of Real Estate 28,041 22,050 81,051 46,525
Gain on Sale of Real Estate 2,853 2,613 6,374 27,333
Provision for Income Taxes
Allocable to Gain on Sale of
Real Estate (1,324) (949) (2,180) (9,933)
Minority Interest Allocable to
Gain on Sale of Real Estate (199) (220) (548) (2,286)
Net Income 29,371 23,494 84,697 61,639
Preferred Dividends (5,442) (2,310) (15,490) (6,930)
Redemption of Preferred Stock - - (672) -
Net Income Available to
Common Stockholders $23,929 $21,184 $68,535 $54,709
RECONCILIATION OF NET
INCOME AVAILABLE TO COMMON
STOCKHOLDERS TO FFO (d)
AND FAD (d)
Net Income Available to
Common Stockholders $23,929 $21,184 $68,535 $54,709
Add: Depreciation and
Amortization of Real Estate 37,859 28,957 110,017 76,972
Add: Income Allocated to
Minority Interest 3,593 3,229 10,346 8,320
Add: Depreciation and
Amortization of Real Estate
Included in Discontinued
Operations 1,070 4,120 6,289 13,114
Add: Depreciation and
Amortization of Real Estate-
Joint Ventures (b) 2,542 791 8,048 1,620
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold (17,377) (11,706) (44,783) (26,896)
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold- Joint
Ventures (b) (654) - (1,337) -
Funds From Operations
("FFO") (d) $50,962 $46,575 $157,115 $127,839
Add: (Gain) from Early
Retirement of Debt - (82) - (82)
Add: Restricted Stock
Amortization 2,487 2,112 7,112 6,932
Add: Amortization of
Deferred Financing
Costs 603 541 1,826 1,560
Add: Depreciation of
Corporate F,F&E 477 343 1,341 1,000
Add: Redemption of Preferred
Stock - - 672 -
Less: Non-Incremental
Capital Expenditures (9,280) (10,405) (29,014) (32,106)
Less: Straight-Line Rent (2,870) (2,432) (7,854) (6,495)
Funds Available for
Distribution ("FAD") (d) $42,379 $36,652 $131,198 $98,648
FIRST INDUSTRIAL REALTY TRUST, INC.
Selected Financial Data
(In thousands, except for per share/unit and property data)
(Unaudited)
Three Months Ended Nine Months Ended
September September September September
30, 30, 30, 30,
2006 2005 2006 2005
RECONCILIATION OF NET
INCOME AVAILABLE TO
COMMON STOCKHOLDERS TO
EBITDA (d) AND NOI (d)
Net Income Available to
Common Stockholders $23,929 $21,184 $68,535 $54,709
Add: Interest Expense 31,622 27,413 90,853 79,106
Add: Interest Expense
Included in Discontinued
Operations - 29 - 373
Add: Depreciation and
Amortization of Real Estate 37,859 28,957 110,017 76,972
Add: Preferred Dividends 5,442 2,310 15,490 6,930
Add: Mark-to-Market/(Loss)
Gain on Settlement of Interest
Rate Protection Agreements (a) 2,942 (1,212) 3,112 (749)
Add: Provision for Income
Taxes 18,002 4,661 35,699 15,989
Add: Redemption of Preferred
Stock - - 672 -
Add: Income Allocated to
Minority Interest 3,593 3,229 10,346 8,320
Add: Amortization of Deferred
Financing Costs 603 541 1,826 1,560
Add: Depreciation of Corporate
F,F&E 477 343 1,341 1,000
Add: Depreciation and
Amortization of Real Estate
Included in Discontinued
Operations 1,070 4,120 6,289 13,114
Add: (Gain) from Early
Retirement of Debt, Net - (82) - (82)
Add: Depreciation and
Amortization of Real Estate-
Joint Ventures (b) 2,542 791 8,048 1,620
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold (17,377) (11,706) (44,783) (26,896)
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold- Joint
Ventures (b) (654) - (1,337) -
EBITDA (d) $110,050 $80,578 $306,108 $231,966
Add: General and
Administrative Expense 20,047 15,382 55,918 38,875
Less: Net Economic Gains (d) (33,387) (24,798) (98,769) (70,182)
Less: Provision for Income
Taxes (18,002) (4,661) (35,699) (15,989)
Less: Equity in FFO of Joint
Ventures (b) (11,528) (7,162) (33,477) (10,432)
Net Operating Income
("NOI") (d) $67,180 $59,339 $194,081 $174,238
RECONCILIATION OF GAIN ON
SALE OF REAL ESTATE TO NET
ECONOMIC GAINS (d)
Gain on Sale of Real Estate 2,853 2,613 6,374 27,333
Gain on Sale of Real Estate
included in Discontinued
Operations 65,368 38,552 171,390 85,734
Less: Provision for Income
Taxes (18,002) (4,661) (35,699) (15,989)
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold (17,377) (11,706) (44,783) (26,896)
Income taxes Allocable to
FFO from Joint Ventures 545 - 1,487 -
Net Economic Gains (d) $33,387 $24,798 $98,769 $70,182
Weighted Avg. Number of
Shares/Units Outstanding-
Basic 50,721 49,042 50,691 48,811
Weighted Avg. Number of
Shares/Units Outstanding-
Diluted (e) 50,721 49,042 50,691 48,811
Weighted Avg. Number of
Shares Outstanding- Basic 44,032 42,468 43,976 42,305
Weighted Avg. Number of
Shares Outstanding-
Diluted (e) 44,032 42,468 43,976 42,305
Per Share/Unit Data:
FFO:
- Basic $1.00 $0.95 $3.10 $2.62
- Diluted (e) $1.00 $0.95 $3.10 $2.62
Loss from Continuing
Operations Less Preferred
Stock Dividends and
Redemption of Preferred
Stock Per Weighted Average
Common Share Outstanding:
- Basic $(0.25) $(0.24) $(0.79) $(0.47)
- Diluted (e) $(0.25) $(0.24) $(0.79) $(0.47)
Net Income Available to
Common Stockholders Per
Weighted Average Common
Share Outstanding:
- Basic $0.54 $0.50 $1.56 $1.29
- Diluted (e) $0.54 $0.50 $1.56 $1.29
Dividends/Distributions $0.7000 $0.6950 $2.1000 $2.0850
FFO Payout Ratio 69.7% 73.2% 67.8% 79.6%
FAD Payout Ratio 83.8% 93.0% 81.1% 103.2%
Balance Sheet Data (end of
period):
Real Estate Before
Accumulated
Depreciation $3,257,337 $3,018,258
Real Estate and Other
Held For Sale, Net 38,557 9,611
Total Assets 3,189,008 2,939,892
Debt 1,790,875 1,787,106
Total Liabilities 2,004,761 1,959,625
Stockholders' Equity and
Minority Interest $1,184,247 $980,267
Property Data (end of
period):
Total In-Service
Properties 871 846
Total Gross Leasable
Area (in sq ft) 70,257,762 69,187,326
Occupancy 93.1% 91.6%
a) Represents the loss on settlement/mark to market of interest rate
protection agreements that do not qualify for hedge accounting in
accordance with Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities".
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. EBITDA includes EBITDA from discontinued operations.
FAD is defined as EBITDA, minus GAAP interest expense, minus preferred
stock dividends, 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.
The Company also reports Net Economic Gains, which, effectively,
measure the value created in the Company's capital recycling
activities. Net Economic Gains are calculated by subtracting from
gain on sale of real estate (calculated in accordance with GAAP,
including gains on sale of real estate classified as discontinued
operations) the recapture of accumulated depreciation and amortization
on real estate sold (excluding the recapture of accumulated
amortization related to above/below market leases and lease
inducements as this amortization is included in revenues and FFO) and
the provision for income taxes.
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