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First Industrial Realty Trust Reports Second Quarter 2018 Results

CHICAGO, July 25, 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 second quarter of 2018. Diluted net income available to common stockholders per share (EPS) was $0.36 in the second quarter, compared to $0.32 a year ago.

First Industrial’s second quarter FFO was $0.39 per share/unit on a diluted basis, compared to $0.38 per share/unit a year ago. Second quarter results reflect approximately $0.01 per share impact related to the temporary dilution from the Company’s 4.8 million share equity offering completed in early May and second quarter property sales.

"Our team delivered another strong quarter across all aspects of our business as we sustained occupancy at high levels and continued to drive rents and grow same-store NOI," said Peter E. Baccile, First Industrial’s president and chief executive officer. "Tenants continue to actively seek logistics real estate as their supply chains grow and evolve and we are excited about the investments we are making to meet this demand."

Portfolio Performance – Second Quarter 2018

  • In service occupancy was 96.9% at the end of the second quarter, compared to 97.1% at the end of the first quarter of 2018, and 95.7% at the end of the second quarter of 2017.
  • Tenant retention by square footage was 89.1%.
  • Same property cash basis net operating income (“SS NOI”) increased 4.5%. Including lease termination fees, SS NOI increased 4.4%.
  • Rental rates increased 7.7% on a cash basis and increased 25.5% on a straight-line basis; leasing costs were $3.02 per square foot.

Development Leasing

During the second quarter, the Company:
  • Leased 100% of the 156,000 square-foot building at The Ranch by First Industrial business park in the Inland Empire West.

In the third quarter to date, the Company:
  • Leased three additional full buildings at The Ranch by First Industrial comprised of 301,000 square feet, 71,000 square feet and 50,000 square feet. These leases bring the 936,000 square-foot, six-building park to 62% leased.

Investment and Disposition Activities

In the second quarter, the Company:
  • Placed in service two buildings, the aforementioned 100% leased 156,000 square-foot facility at The Ranch by First Industrial and a 50% leased, 602,000 square-foot building in Chicago.
  • Completed two developments in lease-up in Southern California and Phoenix totaling 1.4 million square feet.
  • Started construction of the 250,000 square-foot second building at First Logistics Center @ I-78/81 in Central Pennsylvania, with a total estimated investment of $17.5 million.
  • Acquired a vacant 171,000 square-foot distribution center in the Santa Clarita submarket of Los Angeles for $20.7 million that is under redevelopment.
  • Acquired four land sites totaling 158 acres for $16.3 million that can accommodate up to 2.2 million square feet of development.
  • Sold 22 buildings comprised of 785,000 square feet for $55.6 million.
  • Formed a project-specific joint venture with Diamond Realty, the U.S. real estate investment arm of Mitsubishi Corporation, that acquired 532 net acres at the PV-303 business park in Phoenix. The total purchase price was $49.0 million and First Industrial has a 49% interest in the venture. During the quarter, the venture sold a 21-acre site to a corporate customer. First Industrial’s share of the sales proceeds was approximately $1.9 million.

In the third quarter to date, the Company has sold one building totaling 54,000 square feet and one land site for a total of $3.4 million.

Additionally, in the third quarter, the Company expects to start four development projects totaling 1.2 million square feet with an estimated total investment of $96 million and weighted average cash yield of 6.7% comprising:
  • First Aurora Commerce Center, Denver, 556,000 square feet, $38.3 million estimated investment.
  • First Park 121, Dallas, two buildings, 345,000 square feet total, $27.5 million estimated investment.
  • First Perry Logistics Center, Inland Empire East, 240,000 square feet, $20.5 million estimated investment.
  • First Glacier Logistics Center, Seattle, 67,000 square feet, $9.9 million estimated investment.

"Through our platform, we continue to identify and execute on opportunities to enhance our portfolio to drive cash flow growth while delivering attractive risk-adjusted returns on our capital," said Johannson Yap, chief investment officer. "We are pleased to have leased 62% of The Ranch by First Industrial shortly after completion, and we look forward to serving additional demand with our high-quality development projects across several key markets."

Capital Markets

In the second quarter, the Company:
  • Raised approximately $146 million of net proceeds via an underwritten offering of 4.8 million common shares.
  • Received an upgrade of its senior unsecured debt ratings to ‘Baa2’ from Moody’s Investors Service in June.

"Our equity offering in May provided us with additional capital flexibility to fund current investments, planned starts in the third quarter, and future growth opportunities within our pipeline," said Scott Musil, chief financial officer. "Our balance sheet is well-positioned to support our long-term growth, and we were pleased to receive an upgrade from Moody’s in June that recognized our capital strength."

Outlook for 2018

Mr. Baccile stated, "The leasing markets are active and, with overall supply and demand in equilibrium, we are focused on driving incremental cash flow through rent growth and execution on our developments and value-add acquisitions."

The following assumptions were used:
  • Compared to the Company's prior guidance discussed on the Company's first quarter earnings call, current guidance reflects approximately $0.03 per share of temporary dilution related to the second quarter equity offering and property sales, offset by $0.01 per share related to early development leasing relative to pro-forma, and $0.01 related to an increase in capitalized interest.
  • Average quarter-end in service occupancy of 96.5% to 97.5%.
  • Same-store NOI growth on a cash basis before termination fees of 4.5% to 5.5% for the full year. This represents an increase of 50 basis points at the midpoint to 5.0%, reflecting second quarter results.
  • General and administrative expense of approximately $26 million to $27 million. The first quarter severance charge of $1.3 million 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 June 30, 2018 plus the four expected third quarter starts. In total, the Company expects to capitalize $0.05 per share of interest related to its development projects in 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 an insurance claim for a damaged facility previously disclosed, or
    • any future equity issuances.

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, July 26, 2018 at 10:00 a.m. CDT (11:00 a.m. EDT.) 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 second quarter 2018 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