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First Industrial Realty Trust Reports Fourth Quarter And Full Year 2017 Results

CHICAGO, February 21, 2018 – First Industrial Realty Trust, Inc. (NYSE: FR), a leading fully integrated owner, operator and developer of industrial real estate, today announced results for the fourth quarter and full year 2017. Diluted net income available to common stockholders per share (EPS) was $0.81 in the fourth quarter, compared to $0.20 a year ago. Full year 2017 diluted net income available to common stockholders was $1.69 per share, compared to $1.05 per share in 2016.

First Industrial’s fourth quarter FFO was $0.41 per share/unit on a diluted basis, compared to $0.38 per share/unit a year ago. Fourth quarter results include $0.01 per share of income related to an insurance settlement.

Full year 2017 FFO was $1.57 per share/unit on a diluted basis versus $1.45 per share/unit in 2016. Excluding the impact from the gain on the sale of land, income tax expense associated with a property sale, the loss from retirement of debt, the settlement gain related to interest rate protection agreements and the gain related to an insurance settlement, FFO per share was $1.56.

"The First Industrial team produced another successful year in 2017 across all aspects of our business," said Peter E. Baccile, First Industrial's president and CEO. "Our results reflect the high quality of our portfolio and the underlying fundamental strength of the industrial market. We made significant investments in additive acquisitions and replenished our development pipeline with attractive new investments that will contribute to driving long-term cash flow growth and value for shareholders."

Portfolio Performance – Fourth Quarter and Full Year 2017

  • In service occupancy was 97.3% at the end of the fourth quarter, compared to 97.2% at the end of the third quarter of 2017, and 96.0% at the end of the fourth quarter of 2016.
  • Tenants were retained in 53.7% of square footage up for renewal. Retention results included a 366,000 square-foot moveout in Southern California that was re-leased before year-end. For the year, tenant retention was 76.4%.
  • Same property cash basis net operating income (NOI) increased 3.9%. Including lease termination fees, same property NOI increased 3.8%. For the full year, same property cash basis NOI increased 4.4%. Including lease termination fees, same property NOI for 2017 increased 4.6%.
  • In the fourth quarter, rental rates increased 11.7% on a cash basis and increased 20.8% on a straight-line basis; leasing costs were $2.46 per square foot. For the full year, rental rates increased 8.6% on a cash basis and increased 18.2% on a straight-line basis; leasing costs were $1.96 per square foot.

Common Stock Dividend Increased

The board of directors declared a common dividend of $0.2175 per share/unit for the quarter ending March 31, 2018 payable on April 16, 2018 to stockholders of record on March 29, 2018. The new dividend rate represents a 3.6% increase from the prior rate of $0.21 per share.

Capital Markets

In the fourth quarter as previously announced, the Company:
  • Closed a $725 million senior unsecured revolving credit facility which amended and restated its previous facility. The facility matures on October 29, 2021, has a one-year extension option and is expandable to $1 billion, subject to certain conditions. The agreement provides for interest-only payments currently at an interest rate of LIBOR plus 110 basis points based on the Company's current leverage ratio and are subject to adjustment based on the Company’s leverage or credit ratings.
  • Refinanced two unsecured loans totaling $460 million. The first is a $200 million unsecured term loan with a maturity date of January 29, 2021. The loan features interest-only payments currently at an interest rate of LIBOR plus 120 basis points, a 50 basis point improvement in the credit spread from the prior rate. The second is a $260 million unsecured term loan with a maturity date of September 11, 2022. This loan features interest-only payments currently at an interest rate of LIBOR plus 120 basis points, a 40 basis point improvement in the credit spread from the prior rate. Rates on both loans are subject to adjustments based on the Company's leverage or credit ratings.

In the first quarter of 2018 to date, the Company:
  • Closed on a private placement offering on February 15th for $300 million of fixed rate senior unsecured notes with a weighted average interest rate of 3.91%. The notes are comprised of two tranches: $150 million of 3.86% Series C Guaranteed Senior Notes with a 10-year term and $150 million of 3.96% Series D Guaranteed Senior Notes with a 12-year term.

"In the fourth quarter of 2017, we returned to the unsecured debt markets with the benefit of our strong balance sheet metrics and improved credit ratings," said Scott Musil, chief financial officer. "We have significant capital capacity and flexibility that supports our pursuit of profitable investment opportunities, given our low leverage and ability to redeploy retained cash flow and proceeds from select asset sales."

Investment and Disposition Activities

In the fourth quarter, the Company:
  • Started development of First Nandina Logistics Center, a 1.4 million square-foot facility in Southern California in the Inland Empire East with an estimated total investment of $89.3 million.
  • Commenced development of First 290 @ Guhn Road, a 126,000 square-foot facility in Houston with an estimated investment of $9.1 million.
  • Acquired an 86,000 square-foot building in Orlando for $8.2 million and a 100,000 square-foot building in Chicago for $7.0 million.
  • Sold 30 buildings comprising 2.8 million square feet plus one land parcel for a total of $136.9 million.

For the full year 2017, the Company:
  • Placed in service one development in Phoenix in the second quarter, 100% leased, totaling 618,000 square feet with an estimated total investment of $45.4 million.
  • Acquired eight buildings totaling 1.1 million square feet for $112.0 million.
  • Acquired seven land parcels for a total investment of $62.2 million.
  • Sold 60 buildings totaling 4.6 million square feet and one land parcel for a total of $236.1 million.

In the first quarter of 2018 to date, the Company:
  • Completed a long-term lease renewal for its 1.3 million square-foot facility in Eastern Pennsylvania.
  • Leased 100% of its First Sycamore 215 Logistics Center, a 243,000 square-foot development in Southern California.
  • Acquired a 35,000 square-foot, 100% leased building in Seattle for $5.6 million and also acquired a development site in Dallas for $10 million which can accommodate four buildings totaling 727,000 square feet.

"In 2017, we used our platform to advance our portfolio management goals by further allocating capital to value-creating developments and acquisitions," said Johannson Yap, chief investment officer. "This included redeploying $236 million of proceeds from targeted sales into assets with stronger long-term cash flow growth profiles."

Restructuring and Related Charge

In the first quarter of 2018, the Company restructured its staffing to align its personnel with changes in its portfolio resulting from its capital allocation strategy. The severance and other costs related to the restructuring will result in a charge of approximately $0.01 per share in 2018.

Outlook for 2018

Mr. Baccile stated, "In 2018, our focus continues to be on driving incremental cash flow from leasing within our portfolio and our development investments. The supply and demand picture in the industrial real estate sector remains favorable, supporting further market rent growth and growth in cash rents within our portfolio. Our 2018 guidance reflects the temporary dilutive impact of approximately $0.03 per share related to 2017 sales volume that exceeded our target sales range. We are excited about the long-term potential cash flow growth from our redeployment opportunities."

The following assumptions were used:

  • Average quarter-end in service occupancy of 96.5% to 97.5%.
  • Same-store NOI growth on a cash basis before termination fees of 3.5% to 5.0% for the full year.
  • 2018 guidance includes the dilutive impact of approximately $0.03 cents per share related to 2017 property sales that exceeded the Company’s targeted sales volume range.
  • General and administrative expense of approximately $26 million to $27 million. The aforementioned restructuring charge of $0.01 per share is excluded from the general and administrative expense guidance range.
  • Guidance includes the incremental costs expected in 2018 related to the Company’s developments completed and under construction as of December 31, 2017. In total, the Company expects to capitalize $0.04 per share of interest related to these projects in 2018.
  • Guidance reflects the issuance of $300 million of unsecured notes in the private placement at a weighted average interest rate of 3.91% discussed above and the planned payoff of $157.8 million of secured debt maturities at a weighted average interest rate of 4.50% on or about March 1, 2018.
  • Other than the above, guidance does not include the impact of:
    • any other future debt repurchases prior to maturity or future debt issuances,
    • any future investments or property sales,
    • any future NAREIT-compliant gains or losses,
    • any future impairment gains or losses,
    • any future gains related to the final settlement of two insurance claims for damaged facilities previously disclosed, or
    • any future equity issuance.

A number of factors could impact our ability to deliver results in line with our assumptions, such as interest rates, the economy, the supply and demand of industrial real estate, the availability and terms of financing to potential acquirers of 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.

Conference Call

First Industrial will host its quarterly conference call on Thursday, February 22, 2018 at 11:00 a.m. EST (10:00 a.m. CST). The conference call may be accessed by dialing (888) 823-7459, passcode "First Industrial." The conference call will also be webcast live on the Investor Relations page of the Company’s website at www.firstindustrial.com. The replay will also be available on the website.

The Company's fourth quarter and full year 2017 supplemental information can be viewed at www.firstindustrial.com under the "Investors" tab.

FFO Definition

First Industrial reports FFO in accordance with the NAREIT definition to provide a comparative measure to other REITs. NAREIT recommends that REITs define FFO as net income, excluding gains (or losses) from the sale of previously depreciated property, plus depreciation and amortization, excluding impairments from previously depreciated assets, and after adjustments for unconsolidated partnerships and joint ventures.

For more information contact: Arthur Harmon, Vice President - Investor Relations and Marketing