FR - Earnings call transcript Q4 2017 | First Industrial Realty Trust, Inc.

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Operator

Ladies and gentlemen, thank you for standby, and welcome to the First Industrial 2017 Results Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Art Harmon., Vice President, Investor Relations. Please go ahead, sir.

Art Hartmon

Thanks, Lori. to welcome and everybody, our call. Hello,

other of Federal discuss and We our and time as this only XXXX we our call today’s management’s we include the defined expectations, our based assume statements estimates XX-K our statements everyone Today’s obligation accurate fourth results XXXX February may statements from XXXX. by as statements described our other date, full-year plans and are results forward-looking Laws. and guidance, on sensitive our These are quarter XX, factors that Actual Before SEC update no to or materially cause may Securities of filings. information provide. let Thursday, prospects. in and which differ and remind could statements, me be may forward-looking

You in discussed at our earnings financial are SEC can today’s report of release. filings call release The a find and non-GAAP Investors tab. supplemental report, under the supplement our earnings our measures reconciliation and firstindustrial.com, in available

Chief our questions. Management. Bob Vice begin President Officer; and of Capital with and Officer; our on and it Baccile, Asset President our Walter, remarks will Officer, for of Peter Markets which by are Jojo Executive Operations Senior Schneider, Senior call today Yap, open up Peter Executive and Chris your Schultz, Investment President; Vice will Chief we Musil, Vice Chief President after our Scott call Financial Also, Our

Let me over turn the Peter. call to

Peter Baccile

we across joining strong segments, finished for excellent for with year all business Art, demand XX.X% year Thanks, at another and estate real First you us occupancy. the today. was for XXXX thank industrial Industrial, multiple

market supply remains XXXX, and estate rents both our steadily. industrial calls, occupancy continue basis, a previous high portfolio within absorption in but in heard net exceeded grow national real levels, healthy. overall to environment rents slightly On with you’ve As new

trend to were XXXX date. and full-year. our by XXXX, continue quarter this signed rates X.X% XX.X% as in expirations up In rental we cash the for expect evidenced Our a to the fourth

XXXX As in expiring Thanks X.X%, of today, all these facility efforts of in cash average the our We XX% delivering foot rate Pennsylvania. renewal signings of is to my include lease and rental leases, square million pleased Eastern X.X say are to teammates for we have signed the strong long-term at approximately such change results. your

X.X% the Scott will shortly, annualized, our On of our $X.XX declared which of for dividend quarter a or first performance Board share Directors this strength of $X.XXXX of XXXX, outlook, increase. and a per has the represents which discuss

of flow as and to anticipated Importantly, additional new XX% represents our a the retained supplemental. for our into ratio approximately AFFO of XXXX, acquisitions. developments intend payout this defined cash in deploy We

development Given view strong fundamentals, primary our industry to as investment. we new of means continue

cap have we million. it strength X% and growth first represented of to total leasing cap significant our The opportunities ahead, our this see by increased ago, our $XXX years million similar earning for the strong growth and other returns value leasing good create We’ve while are to one and on flow done building profiles, both cap. shareholders. strong risk, assets We process speculative self-imposed our $XXX cap. balance initiated sheet several the with our represents bottoms-up we market speculative on we growth the through cap fundamentals, managing underwriting with so Based a upon cash percentage. risk-adjusted new eye When level

from call, improved times our X.X times. to new X.X X.XX this metrics Since cap period. X.XX two In to the last EBITDA we’ve ratio we XXXX, and debt we has charge times our improved increased started developments. quarter the first our significantly have balance from fixed last Since coverage over we addition, to times, sheet reduced in of have our ratio

development, on that get when let cash cash details, we’re talking year NOI Before over first the everyone basis. GAAP remind me the talk the investment into about I yields we stabilized about

million Logistics million. Nandina East in Inland in center with distribution the Empire $XX Center Moreno estimated the X.X square a foot is of total a investment First Valley submarket

targeting fourth Recall this near quarter the site speculative completion and few a of years yield assembled is stabilized in this cash XXXX developments. of that are prior our we a of development X.X%. of several a ago We successful

the feel are We investment dynamics and Inland Empire. in about in this demand this excited the about good current segment size supply

XXX,XXX on XXX the third Guhn site First Road we @ a acquired which square started North a quarter. also facility Houston, in West We is during foot

is in portfolio Our quarter depth the and Targeted XXXX. to completion third good show demand. in Houston continues market overall

our Our ahead we cash X%, date, of successfully first respectively. development square and better rate Empire this XXX,XXX yield and leasing First regard our schedule to With than We a and leased estimated pro are Logistics the in cash investment to leased quarter – foot asset yield estimated XXX Center Sycamore Inland East. the and $X.X forma. million at in

translates XX%, X.X%, is healthy around the cap which profit in that market yield are of margin considering assets prevailing for area. similar rates a very cash into mid-X% Our

investment our as feet process Excluding targeted market weighted weighted than in Chicago, Houston a believe in be the a More Sycamore million implies yield of the would Central as with half property average First includes stabilized Southern rates mid-Xs, speculative projects well completed comprising developments these California Pennsylvania, of square approximately in now X.X%. Phoenix, X.X totaled the and margin of projects of this today, is XXX, $XXX average million, XX%. development mentioned which also earlier. when and for today’s in cap stabilized We the as in cash

signed Empire to buildings project at completed leases this in acquisition the slated six all has our were XX,XXX Orlando call. buildings quarter. be in foot last in on to to We acquisitions continues $X.X successful report Ranch, market this now The square time. no two for The be We for in interest second acquiring quick quarter, our competitive. leasing been discussed good, West. but a Just on the Inland six-building update is Construction our million

in Chicago for of submarket the a XXX,XXX $X a acquired also facility million. We square Kenosha foot via sale-leaseback

cap average weighted Our acquisitions two combined was these X.X%. for rate

average at building cap For the rate expected million of acquisitions weighted $XXX square feet year, totaled X.X%. and X.X a million

foot acquired $XX for Seattle four also XXX,XXX already and for to a is in-place Southern California, totaling million can facility PA, Houston, X.X%, acquired a of square production. located accommodate and $X.X which million first in at land in date, site added an the Dallas also Phoenix, we Chicago that In feet. We buildings we square quarter XX,XXX of in majority the cap Central in rate development of $XX million

These and a number and for totaling sold Indianapolis. rate Moving weighted in The included on rate to Minneapolis, of were we quarter, X.X Atlanta cap square one average $XXX.X feet, dispositions X.X%. fourth portfolios stabilized across markets million. was In buildings, the dispositions. plus was XX million cap X.X% land the and in-place parcel

we million For dilution significantly dilution capital high-quality growth. the $XXX.X proceeds as $XXX acquisitions. XX exceeded this be for and caused for markets program This $X.XX superior share the driver have parcel developments XXXX and But by on million. our totaling opportunities believe of XXXX our additional management. of flow These ongoing sold as we guidance. offer allocate that The sales year, to into redeploy we X.X we portfolio as won’t we temporary of square buildings, This million. view about FFO to over goal select and continues sales cash the land rental per our rate one million and into midpoint sales continue feet $XX change properties sales

are we the XXXX, million For to targeting sales of range $XXX in $XXX million.

properties, been allocation Investor November, from shift has at on average in capital resulting tenant in our the discussed CapEx-intensive lower we assets multi-tenant and count. away and a last Day towards larger As management

As our efforts, it with a result necessary of align and personnel prudent these our changes the became in portfolio. to

our resulting of thing our of quarter, XX we changes restructuring the in a in the have These we do to moment. these efforts. in better walk such, people. are resources headcount through our reduction impact never financial to staffing, Scott were believe right easy, a our restructured As with growth first actions align the will but in

by our me achieved year. measures team by we of it With all Further, prospects Let let over emphasizing results for and company. excellent to the an turn we enthusiastic me proud conclude industry the our in how about by Scott. XXXX that, our are remain

Scott Musil

Peter. Thanks,

results Let Diluted one for versus funds were the operations to year from $X.XX in the overall $X.XX per quarter. share $X.XX EPS ago. per XXXX. me XQ compared share, was $X.XX NAREIT with start diluted fully

a insurance $X.XX share. Excluding share an per settlement, in was related gain to fourth XXXX $X.XX per quarter Full-year versus XXXX. $X.XX FFO FFO was XXXX

basis expense from gain agreements, rate debt, from Excluding per points the related land one-time share. the ago. gain our points tax year and with sale, XXXX as a retirement of XXX related the loss a income protection at year to FFO to the XX interest settlement, insurance XX.X% quarter finished from basis gain the property prior occupancy, We associated was settlement such up a $X.XX an from sale, a items, and

rental was square Regarding at leasing within X.X feet for were healthy of up. feet Empire the million that rate or during long-term backfilled move-out with lease square the square footage XX.X%, quarter XXX,XXX Of XXX,XXX volume, we were square reflecting quarter. cash Tenant of by XXX,XXX these feet foot new, in commenced a and approximately developments retention were leases XXX,XXX renewals, Inland square a acquisitions increase XX%. the

of leases of square of we the feet a For retention commenced total year, XX million XX.X%. tenant and

Lease termination a on termination fees excluding cash $XXX,XXX termination and cash growth X.X%. NOI fees, same-store quarter, totaled was the NOI was basis, same-store fees For X.X%. growth including

XX.X% fees NOI straight-line For XX.X%, new leasing with XX.X%. cash X.X% a renewals was XX.X%. increasing basis, overall renewals new X.X%. including a termination fourth rates XX.X% were the On and In termination year, a was overall, cash the up up on excluding rental up quarter, fees and leasing rental up were rates growth with same-sort X.X% basis, up and

XXXX, and cash straight-line up were rates were the on overall basis, full-year XX.X%. a rental up X.X% they For

a with $XXX at notes. side. is placement rate the We million of $XXX now senior XX-year Moving a comprised maturity our on closed of XX-year $XXX capital and rate a with unsecured a at of just of million This million of to X.XX% maturity private X.XX%.

of treasury to from fourth the also a We a effectively average weighted the for gain rate the lock which settled X.XX% interest loans million, reduced in $X.X on quarter X.XX%.

proceeds which approximately million $XXX cash. We credit with additional of leaves of zero, have used to our us the pay down line to

million X%. March the gross of pay or as will We loans to $XXX to approximately line will a Upon below mortgage debt on along excess our assets loans, around XX% secured credit with our retiring percentage X. off use fall these on borrowings of of cash

a powder Moving to on EBITDA XQ, preferred income the plus us which to adjusted At with December stock of few debt new plenty weighted sheet average settlement. notes, investments. of average Adjusted and of the XX, credit dry an a our financings is our At X.X metrics. gives net insurance loans balance weighted for maturity end unsecured exclude times, term figures to facility. years rate secured excludes X.X EBITDA These interest related X.XX%. of was our

initial guidance Now moving to release last evening. per our our press on XXXX

NAREIT initial is to a per guidance FFO Our $X.XX. share, $X.XX of $X.XX midpoint with

to per per $X.XX $X.XX of midpoint guidance share share share. the Excluding charge, is $X.XX with a FFO restructuring per $X.XX

which of noted, G&A basis to basis cash This per includes occupancy we seasonal for guidance approximately guidance costs $X.XX a $XX capitalize restructuring developments completed on our are of XX.X% to XX excludes rollover our our on of $X quarter, X%; dip, total, As and exceeded to XX. XXXX NOI targeted in Based range for share same-store Peter the impact In expect quarter-end million included a related $X.XX points; The approximately dilutive quarter our our a as December is range the could share occupancy XXXX temporary to full-year to million. first sales follows. will the under-construction the we of that XXXX $XX anticipate related assumptions Average X.X% sales to our range. have first guidance property Guidance per charge. anticipated key interest XX.X%. about typical growth XXXX, at guidance related million developments. to be

or repurchases issuance damaged the development NAREIT-compliant and the I impact any just future or and starts March million expected and claims future we this other two turn me sales, issuances, $XXX the any payoff of impact does to of reflect of future Our any that guidance closed future excludes of potential call, impact for acquisitions gains also discussed. to losses, the the With $XXX just that, of not does the Peter. back repayments debt or after settlement impact equity. place it over of million of any not final insurance gains Guidance facilities impairments the guidance secured debt related let private of the the than debt reflect in

Peter Baccile

Thanks, Scott. the success XXXX environment on to I on FR in XXXX. was focused team an favorable excellent know the drive entire and capitalizing year, is

and and growth With care for investing so and our We value please to our portfolio taking by create for it flow future up of will operator, shareholders. do open cash questions. generate customers that,

Operator

the Your Rob Instructions] question Stevenson of [Operator first of line comes from Janney.

Robert Stevenson

Good morning, guys.

to you your of would based what fundamentals, are that you at top bottom markets the today? the here sit bottom the ranking And If you of would at three on where are XXXX as list? the think the do expected top be the three operating list be

Peter Baccile

are strong. lot terms market, Yes. softness, markets I And there South would things where Well, that rent growth. I other three just markets, the there’s be some in use still has would of general would LA you and a by terms as there’s a growth LA, are submarkets say say I barometer. would coastal in to just And but there worked demand. would those South are say, mean, in supply markets that there. markets in me would on say Bay would pretty And I operating Northern like be markets of lot I some Florida I of rank be of measure can Jersey rent let fundamentals, top there.

Dallas, And I-XX I you gets growth in might so say won’t rent there there, the probably probably probably some South out well. And would corridor, that market you rent as be, would not much you might rental the won’t growth there get probably you much Atlanta, – put not Northeast until of get bulk there get consumed. supply I Indy

Robert Stevenson

then time? the XXXX Anything this And expirations. looking you Okay, XXXX to that’s a helpful. guys that’s when non-renewal are at lease big at known

Christopher Schneider

is Chris. Yes, this

our out more we’ll feet, If obviously, material you pretty square XXX,XXX XXXX, give greater no there. later lease nothing you expirations that a are in anticipated remaining There’s XXXX, on minimal at move-outs look it’s than so information And that. number.

Robert Stevenson

Peter, $XXX that to to dispositions driving fluctuate going from you higher you? thinking based Okay. and How you? perceived development the What’s me. you you off said this is that that? well the are off guys of comments, what on as targeted fluctuating somebody to And get in is Is as mind? your to on acquisition year. your than basically significantly where opportunities you value in about Is then come last for it pipeline else million based need offers of that to decent what of what fund that

Peter Baccile

the So a of portfolio there just the up think where that to growth that markets, a $XXX flow lower are in XXXX, Jojo is is the growth that assets bottom just opportunity million we involved really continuing lot of management high-growth coming went line it’s factors $XXX on into overall is with redeploy And that focus think through. we capital cash and some and range. But monetize that range higher for market million. to

some of to opportunities numbers go beyond if dispose that of that outstanding our range. beyond we’ll certainly above consider course, other we and Of find assets,

Robert Stevenson

Okay. Thanks, guys.

Operator

line from of of comes the Craig Mailman question Keybanc. next Your

Craig Mailman

Congrats getting the Amazon Hey, done. guys. renewal

X.X% curious, renewal Eastern said signed expirations you kind you mark-to-market mark-to-market in? would so of far. XXXX the Just the come Where PA on

Peter Schultz

Yes, So, were get them. it’s Peter long-term Craig, pleased lease signed that Schultz. we to with

cash As if rental prohibit Peter impact with that terms. X.X% It what from can you the about that you is. that back you probably confidentiality really were talked of any rate probably us disclosing Day, provisions to Investor is where about. under in we’re of the tenant think very know, of change And the kind we tight that think

Craig Mailman

that you take the signed? the other deal, ask guess, if I mark-to-market is where that Right. way to maybe leases is, out on it you another

Peter Schultz

can’t we would But the was we Amazon Again, specific back to a that I point which deal. than higher on Day, about give number. color the just Yes. you Investor bit you what talked at little

Craig Mailman

do baked kind current in Okay. X.XX%? you in of then, you guidance, bad Scott, And have number in, what your just guys is the into layered for traditionally same-store expense think curios, some debt

Scott Musil

expense. our that’s guidance again, was we and debt million $X have $X.X XXXX of of $XXX,XXX. less bad company. XXXX’s on in guidance XXXX, only based expense Craig, million budgeted the than our That’s bad our Well, metrics for long-term about debt

same-store that So is debt X.XX%, increase impact down. midpoint of bad guidance forecasted XX when of you that’s expense about look percentage at basis points – range in our that taking

guidance. extent to that things expense we’re So other bad equal, All X.XX% the of have debt we ahead able should the same-store to midpoint lower than that. being be

Craig Mailman

guys. Thanks, Great.

Operator

of of Bin next Your line question Kim the Ki with comes SunTrust.

Ki Bin Kim

guys. morning, Good

Peter Baccile

Hey, Bin. Ki

Ki Bin Kim

Hey. back Can less. that or you go X.X% cash to rates renewal

have a set don’t XXXX. it, for would you XX% were posted I I it’s make lower or completed. bit that that leases XXXX deal but said think want expire been than on you about little that? in a to plus Any big color what to

Christopher Schneider

Ki at XXXX Overall, looking still rents cash Yes, in of are be we to X% in overall Bin. X%. range the to

than much not lower it’s So that.

So in pretty but push we the be see as is still far rents as renewing market. and to able strong market overall tenants retention

Scott Musil

think around I did Bin, was Ki year And it we call a when statistic. similar time last Yes. the this

was same I rate. XX% around it the about think

We beat have now. that’s X% can things kind cash of where We we budgets, of think to on range seeing right to rents are guidance we a can of what but do our X%. hope we

Ki Bin Kim

and Could you to It Okay. new and about your that development bit come be? little rounds picture seems like development are the should a to bigger in good where development maybe regards of talk of hard sites And pipeline. kind submarkets good by?

Peter Schultz

margin opportunity expect the high-rent as all that West are we you see rents remains. in last in well. the more. still significantly the going invest for up Seattle, Coast certainly of tougher I’ll so just the those a That in yes, to certainly years. hand would are sites us getting up the commensurate, question and been that and Francisco growth because values markets markets. not let’s tougher forget, buy have no Luckily, there San I’ll great markets yield start it out resources and Seattle. that Sure. have in include going going is can added they’re to and it’s building Jojo then noticed we development in and we you up, Look, Land But couple to over markets, acquired some in

Jersey, more South well, and So Pennsylvania, us capital East Coast to? area Jojo, then on invest see will New do Washington there. you want the And as Florida.

Johannson Yap

First said. land assemble but XXX time, our off-market on, now same parcels we the Guhn coming local those it’s or basically add to the we that to portfolio. our leverage and Houston. Road with a it’s pleased non-widely two or Remember marketed other great and when lease our do we relationships in have what a cases, really in we those That’s now, have too. you right do Just and time. down lot land nothing of existing could Yes, First announce right, accretive you’ve that to it we’ve very, buildings. But development bit platform. yet. @ But develop have we Nandina find you do that And in once platform where to to new Peter those seen situations us build very Takes at Right we’re started can land than developments – of

Ki Bin Kim

And does Nandina site sellers, right? multiple assembled – the through was

Johannson Yap

cash land what entitled, that’s market the contributing yield. really yes. X.X% price in way of up Exactly, where at terms And is fully and below that’s ended projected we to

Ki Bin Kim

Thank Okay. you.

Operator

from comes of question Dave Rodgers Baird. of next line Your the Instructions] [Operator

David Rodgers

Hey, guys. good morning,

Peter Baccile

morning. Good

David Rodgers

I if I want could. Peter, start, to

I But yourself some the it’s raising on bit clearly on leased, talk you are development realize to now whole you But and margins cap. terms doing. you guys to out little pipeline sits have construction on and the construction you point that spec spec developments have an comments, you at under of on the high in of going that. pipeline your island still listening about at a very under put X% full lease obviously, still and this the time Just have development what

comfortable some of without developments the how notwithstanding do of how the leased to keep cap put comfortable today having of size mitigated. were But guess, I work fully development does you risk any XXXX leased? maybe money guess more that continuing get do into I get to realizing money up? the that you which putting So more

Peter Baccile

to developments, we’re future. but bit lumpy, report certainly in constantly be only So build-to-suits speculative the to a not able also and evaluating some look, are build-to-suits. opportunities for They we hope

we record where the far spec thank time pipeline put be and lease-up leasing only As development to us for out good like concerned, significant. we feel that we’ve those up underwriting. quickly, are is had you within XX-month that, the want for pointed are – the and we a out, pretty our for there And markets as we projects track but projected in that not opportunities the as in you well

will it. So it’s feel about work. Jojo, strength we relative overall We to We the to feel our to want that? to volume working. good capital and continue it anything about you good add think do

Johannson Yap

one then spreads. we that to And of that’s been longest is just the doing amount do for what always thing and – our that. time commit we we’ve been – to and develop we that’s will Yes. would Dave, And continue will to

so And Peter to mentioned, criteria. investment has to meet It addition that markets the our in

investment million. increased criteria as has to meet well. capital despite we our So our the $XXX It fact,

Peter Baccile

cap So target. that is a not a cap

So going way in be we that operate continue got underwrite opportunities. obviously, we’ve to but more we’re room diligent to these now, the to

Scott Musil

would thing. And, last Dave, one I say

year-end. If at Sycamore supplemental for to you subsequent our First lease look we XXX completed, did developments

First lot generally QX left at the XXXX. There are until But We isn’t on it XXXX the XX% have XX. if earliest and a under is complete. of in to you goes look developments the Park leasing construction, buildings the buildings completion QX

reasons X% that the development leased of pipeline. in we’re our So that’s one

David Rodgers

maybe Great. follow-up. then And color. that Thanks one for

couple dilution certainly understand the said and from that. a times of You sales temporary asset

additional to I guidance this think sales year. gave more of asset expectations You

more I we might back about saying so temporary more, really that temporary, are will didn’t at a acquisitions least going Can to as or acquisitions, didn’t Is about development, are because to money couple You put buy the you dilution temporary mean there? work in you really it’s or hear if you talk years? talk the you color did. of

Peter Baccile

above. It’s profitable in new going have numbers. proceeds meet developments flow We really we to reinvest we’re invest specific acquisitions cash opportunities it. we’re When our after going not opportunities don’t to all to because the of we to that find targets and go of just disclose, capital kind select we’re in to we quickly. to way, do And be have opportunity a going and in think a timely those to do able generate an basis

So that I answers the questions specifically, at how look process. don’t your if we whole kind know of but that’s

David Rodgers

Thanks, Yes, that’s I helpful. think, guys.

Peter Baccile

Thank you.

Operator

question of line Your Frankel Street the Eric next Green comes from of Advisors.

Eric Frankel

you. Thank

over, touching the something of I it of XX% the Is Just to you confirm roughly just in a little bit signed upon that operating rolling net lower? or rents, XXXX amount early that want are your leases it ones is guidance, including guidance.

Christopher Schneider

the XXXX. XXXX, XX% commencing are overall, of leases of Eric, that in leases are again, those commencing took in that care we

Scott Musil

XX% But you’re you I the that but But call be to. Art was think what’s that Yes. in three discloses think referring at four you Eric, exact number, look that or were I already you it supplemental get probably back signed. number right our the leasing XX% and call around I there. if left leases or and after we’ll roll has should quarters, to let

Eric Frankel

that’s Thank Okay, you. helpful.

transactions? at are processing a that people on the just filed, those reorganization. these strategy. that transitions in obviously, Just people is more business are a What or exactly are question necessary difficult, Is headquarters given reorganization? But that, is in involved the perhaps your

Peter Baccile

and ourselves has capacity. going into largely of to people not over to It and make prudently time. sure money more to add only mix extra executives. assets. was And time, – we managing we have the directly a opportunity those want over that the we’re But the more above. look, as was, the remain field way flexible we potentially in portfolio driven some was look by reinvest all overhead. are senior into our the evolved we to that of It found said, We It with people as growth opportunities

Eric Frankel

Okay, thanks. got. That’s all I

Operator

now questions. Instructions] for are return this [Operator marks. closing At there Baccile no any to call further Peter time or will additional I the

Peter Baccile

today. and if operator, for look out Thank call in forward me. of many please Thanks feel for you to you, thank Scott weeks. or have care. a couple in our on We In you free joining. the any to questions, Take to participating meantime, Florida seeing you of all reach

Operator

Thank Industrial results you. conference today’s XXXX does call. First conclude That

disconnect. You may now

First Industrial Realty Trust (FR) 23 Feb 182017 Q4 Earnings call transcript