First Industrial Realty Trust
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CHICAGO, April 26 -- First Industrial Realty
Trust, Inc. (NYSE: FR), the nation's largest provider of diversified
industrial real estate, today announced results for the quarter ended March
31, 2006. Diluted net income available to common stockholders per share
(EPS) was $0.39 in the first quarter, up 18% compared to first quarter
2005. First quarter funds from operations (FFO) grew 21% to $0.97 per
share/unit on a diluted basis from $0.80 per share/unit a year ago.
"Growth in funds from operations accelerated in the quarter, driven by
investments we made in all parts of our business, primarily people, markets
and new capital sources," said Mike Brennan, president and CEO. "During the
quarter, we expanded our capital capacity even further by forming a new net
lease co-investment program that will serve the growing needs of our
corporate customers."
Portfolio Performance for On Balance Sheet Properties
-- Occupancy was 90.7%, compared with 90.8% in first quarter 2005
-- Leased 6.2 million square feet in an expanding portfolio
-- Retained tenants in 58% of square footage up for renewal during the
quarter
-- Same property net operating income (NOI) decreased 6.9% in the first
quarter, compared with a decrease of 3.4% in the fourth quarter.
David Draft, executive vice president of operations, commented, "Last
quarter, we stated that occupancy would be lower in the first quarter, but
increase throughout the remainder of the year, and we remain confident in
that outlook."
Total net operating income grew 6% in the first quarter due to growth
in the portfolio. Four tenants not renewing their leases accounted for a
majority of the 1.7% decline in occupancy from fourth quarter 2005. Certain
other items, including the non-cash straight line adjustment and lease
termination fees, accounted for the majority of the first quarter same
store net operating income decrease, but these factors are anticipated to
lessen in future quarters. Same store net operating income is anticipated
to improve significantly each quarter for the rest of the year and to be
approximately even for full year 2006.
Rental rates improved to negative 2.3% from negative 4.4% in 2005.
Tenant improvement and leasing costs also improved to $2.22 per square foot
from an average of $2.36 in 2005.
Investment Performance: First Quarter 2006
Balance Sheet Investment/Disposition Activity (in millions)
Property Acquisitions $147.1
Square Feet 2.4 million
Stabilized Weighted Average
Capitalization Rate 8.4%
Developments Placed In Service $65.1
Square Feet 1.2 million
Expected Weighted Average
First-Year Stabilized Yield 7.5%
Land Acquisitions $11.9
Total Investment $224.1
Property Sales $293.2
Square Feet 4.5 million
Weighted Average
Capitalization Rate 6.8%
Land Sales $3.7
Total Sales $296.9
Joint Venture Investment/Disposition Activity
Joint Venture Investments
2005 Development/Redevelopment $32.5
2003 Net Lease 31.2
Total Joint Venture Investments $63.7
Joint Venture Dispositions
2005 Development/Redevelopment $50.6
2005 Core 8.1
Total Joint Venture Dispositions $58.7
"Through our national platform, First Industrial's team continues to
source profitable acquisitions and development opportunities that are
driving our growth," said Johannson Yap, chief investment officer. "As we
execute on our strategy of providing comprehensive, integrated real estate
solutions to Corporate America, we continue to replenish our strong
pipeline."
Investment Pipeline and Second Quarter To-Date Investments
Second quarter to-date, $173 million of acquisitions have already been
completed, which combined with developments currently and soon to be under
construction of $367 million and acquisitions under agreement of $347
million, total $887 million. The breakdown is as follows:
Balance Joint
(millions) Sheet Ventures Total
Developments $180 $187 $367
Acquisitions $166 $354 $520
Total $346 $541 $887
Solid Financial Position
-- Fixed-charge coverage was 2.7 times and interest coverage was
3.2 times for the quarter
-- 97.2% of the Company's real estate assets are unencumbered by
mortgages
-- 8.7 years weighted average maturity of permanent debt
-- 100% of permanent debt is fixed rate
"In first quarter 2006, we increased our capital capacity by forming a
new net lease co-investment program with UBS Wealth Management-North
American Property Fund Limited," said Mike Havala, chief financial officer.
"Since the beginning of 2005, First Industrial has expanded its
co-investment capital capacity by nearly $3 billion, which gives us
substantial resources to serve the real estate needs of our corporate
customers and deliver higher earnings growth."
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, "The outlook for economic growth, expansion in
international trade, and supply chain reconfigurations by Corporate America
are expected to increase demand for First Industrial's real estate
solutions."
Mr. Brennan added, "First Industrial's 2006 guidance range is $3.90 to
$4.10 for FFO per share/unit and $2.00 to $2.20 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 $35 million and $40 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
2Q 2006 2Q 2006 for 2006 for 2006
(Per share/ (Per share/ (Per share/ (Per share/
unit) unit) unit) unit)
Net Income Available
to Common Stockholders $0.50 $0.56 $2.00 $2.20
Add: Real Estate
Depreciation/Amortization 0.70 0.70 2.90 2.90
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold (0.25) (0.25) (1.00) (1.00)
FFO $0.95 $1.01 $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 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,
April 27, 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 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
March 31, March 31,
2006 2005
Statement of Operations and Other
Data:
Total Revenues $96,836 $78,951
Property Expenses (34,481) (27,887)
Build to Suit For Sale Costs (666) -
General & Administrative Expense (17,636) (11,922)
Depreciation of Corporate F,F&E (416) (320)
Depreciation and Amortization
of Real Estate (35,938) (24,203)
Total Expenses (89,137) (64,332)
Interest Income 639 389
Interest Expense (29,488) (25,802)
Amortization of Deferred Financing Costs (620) (509)
Mark-to-Market/Loss on Settlement of
Interest Rate Protection Agreement (a) (170) 941
Loss from Continuing
Operations Before Equity
in Net Loss of Joint Ventures,
Income Tax Benefit, and
Minority Interest Allocable
to Continuing Operations (21,940) (10,362)
Equity in Net Loss of Joint Ventures (b) (34) (122)
Income Tax Benefit 6,037 2,016
Minority Interest Allocable to
Continuing Operations 2,825 1,400
Loss from Continuing Operations (13,112) (7,068)
Income from Discontinued
Operations (Including Gain on Sale
of Real Estate of $53,578 and $13,496
for the Three Months Ended March 31,
2006 and 2005, respectively (c)) 55,438 16,952
Provision for Income Taxes Allocable
to Discontinued Operations (Including
a provision allocable to Gain on Sale
of Real Estate of $14,593 and $2,893
for the Three Months Ended March 31,
2006 and 2005, respectively) (15,332) (3,898)
Minority Interest Allocable to
Discontinued Operations (c) (5,290) (1,712)
Income Before Gain on Sale
of Real Estate 21,704 4,274
Gain on Sale of Real Estate 1,519 21,484
Provision for Income Taxes Allocable
to Gain on Sale of Real Estate (92) (7,538)
Minority Interest Allocable to
Gain on Sale of Real Estate (188) (1,830)
Net Income 22,943 16,390
Preferred Dividends (5,019) (2,310)
Redemption of Preferred Stock (672) -
Net Income Available to
Common Stockholders $17,252 $14,080
RECONCILIATION OF NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS TO FFO (d) AND FAD (d)
Net Income Available to
Common Stockholders $17,252 $14,080
Add: Depreciation and
Amortization of Real Estate 35,938 24,203
Add: Depreciation and Amortization
of Real Estate Included in
Discontinued Operations 1,915 3,771
Add: Income Allocated to
Minority Interest 2,653 2,142
Add: Depreciation and Amortization
of Real Estate-
Joint Ventures (b) 2,417 335
Less: Accumulated
Depreciation/Amortization on
Real Estate Sold (10,844) (5,424)
Less: Accumulated
Depreciation/Amortization on
Real Estate Sold-
Joint Ventures (b) (84) -
Funds From Operations
("FFO") (d) $49,247 $39,107
Add: Restricted Stock Amortization 2,145 1,890
Add: Amortization of Deferred
Financing Costs 620 509
Add: Depreciation of Corporate F,F&E 416 320
Add: Redemption of Preferred Stock 672 -
Less: Non-Incremental Capital
Expenditures (9,992) (10,583)
Less: Straight-Line Rent (2,481) (2,250)
Funds Available for
Distribution ("FAD") (d) $40,627 $28,993
FIRST INDUSTRIAL REALTY TRUST, INC.
Selected Financial Data
(In thousands, except for per share/unit and property data)
(Unaudited)
Three Months Ended
March 31, March 31,
2006 2005
RECONCILIATION OF NET INCOME
AVAILABLE TO COMMON STOCKHOLDERS
TO EBITDA (d) AND NOI (d)
Net Income Available to
Common Stockholders $17,252 $14,080
Add: Interest Expense 29,488 25,802
Add: Interest Expense
Included in Discontinued
Operations - 173
Add: Depreciation and
Amortization of Real Estate 35,938 24,203
Add: Depreciation and Amortization
of Real Estate Included in
Discontinued Operations 1,915 3,771
Add: Preferred Dividends 5,019 2,310
Add: Redemption of Preferred Stock 672 -
Add: Provision for Income Taxes 9,387 9,420
Add: Income Allocated to
Minority Interest 2,653 2,142
Add: Amortization of Deferred
Financing Costs 620 509
Add: Depreciation of Corporate F,F&E 416 320
Add: Depreciation and Amortization of
Real Estate- Joint Ventures (b) 2,417 335
Less: Accumulated
Depreciation/Amortization on
Real Estate Sold-Joint
Ventures (b) (84) -
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold (10,844) (5,424)
EBITDA (d) $94,849 $77,641
Add: General and Administrative
Expense 17,636 11,922
Less: Net Economic Gains (d) (35,103) (20,136)
Less: Provision for Income Taxes (9,387) (9,420)
Less: Equity in FFO of
Joint Ventures (b) (6,570) (1,891)
Net Operating Income ("NOI") (d) $61,425 $58,116
RECONCILIATION OF GAIN ON SALE
OF REAL ESTATE TO NET ECONOMIC GAINS (d)
Gain on Sale of Real Estate 1,519 21,484
Gain on Sale of Real Estate included
in Discontinued Operations 53,578 13,496
Less: Provision for Income Taxes (9,387) (9,420)
Less: Accumulated
Depreciation/Amortization
on Real Estate Sold (10,844) (5,424)
Add: Economic Gains from the Sale of
Joint Venture properties (d) 237 -
Net Economic Gains (d) $35,103 $20,136
Weighted Avg. Number of
Shares/Units Outstanding- Basic 50,644 48,625
Weighted Avg. Number of
Shares/Units Outstanding- Diluted (e) 50,644 48,934
Weighted Avg. Number of Shares
Outstanding- Basic 43,887 42,158
Weighted Avg. Number of Shares
Outstanding- Diluted (e) 43,887 42,466
Per Share/Unit Data:
FFO:
- Basic $0.97 $0.80
- Diluted (e) $0.97 $0.80
Loss from Continuing Operations
Less Preferred Stock Dividends
and Redemption of Preferred Stock
Per Weighted Average Common Share
Outstanding:
- Basic $(0.40) $0.06
- Diluted (e) $(0.40) $0.06
Net Income Available to Common
Stockholders Per Weighted
Average Common Share Outstanding:
- Basic $0.39 $0.33
- Diluted (e) $0.39 $0.33
Dividends/Distributions $0.7000 $0.6950
FFO Payout Ratio 72.0% 86.4%
FAD Payout Ratio 87.3% 116.6%
Balance Sheet Data (end of
period):
Real Estate Before
Accumulated Depreciation $3,117,815 $2,867,216
Real Estate and Other Held
For Sale, Net 151,745 49,926
Total Assets 3,127,437 2,709,506
Debt 1,789,606 1,569,813
Total Liabilities 1,973,221 1,724,831
Stockholders' Equity and
Minority Interest $1,154,216 $984,675
Property Data (end of period):
Total In-Service Properties 884 848
Total Gross Leasable Area
(in sq ft) 68,819,605 63,554,316
Occupancy 90.7% 90.8%
a) Represents the loss on settlement/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".
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.
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.
SOURCE First Industrial Realty Trust, Inc.
Web Site: http://www.firstindustrial.com
