First Industrial CEO Discusses Q3 2010 Results – Earnings Call Transcript

First Industrial CEO Discusses Q3 2010 Results â¿¿ Earnings Call Transcript
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First Industrial Realty Trust, Inc. (

FR

)

Q3 2010 Earnings Call Transcript

October 27, 2010 11:00 am ET

Executives

Art Harmon – Director, IR

Bruce Duncan – President and CEO

Scott Musil – Acting CFO

Chris Schneider – SVP, Operations and Chief Information Officer

Analysts

Ki Bin Kim – Macquarie

Steven Frankel – Green Street Advisors

Suzanne Kim – Credit Suisse

Paul Adornato – BMO Capital Markets

Dan Donlan – Janney Capital Markets

Ralph Davies – J.P. Morgan

Joe Rice – Erie Insurance

Ben Mackovjak – Rivanna Capital

Mike Muller – J.P. Morgan

Presentation

Operator

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Previous Statements by FR
» First Industrial Realty Trust, Inc. Q2 2010 Earnings Call Transcript
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» First Industrial Realty Trust, Inc Q3 2009 Earnings Call Transcript

Good morning. My name is Chris and I will be your conference operator today. At this time I would like to welcome everyone to the Industrial third quarter results call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I will now turn the call over to Art Harmon, Director of Investor Relations. Please go ahead, sir.

Art Harmon

Thanks, Chris. Hello, everyone, and welcome to First Industrial's call. Before we discuss our third quarter 2010 results, let me remind everyone that the speakers on today's call will make various remarks regarding future expectations, plans and prospects for First Industrial, such as those related to our liquidity, management of our debt maturities, portfolio performance, our overall capital deployment, our planned dispositions, our development and joint venture activities, continued compliance with our financial covenants and expected earnings.

These remarks constitute forward-looking statements under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. First Industrial assumes no obligation to update or supplement these forward-looking statements. Such forward-looking statements involve important factors that could cause actual results to differ materially from those in forward-looking statements, including those risks discussed in First Industrial's 10-K for the year ending December 31st, 2009 filed with the SEC and subsequent report on 10-Q.

Reconciliation from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report available at firstindustrial.com under the Investor Relations tab. Since this call maybe accessed via replay for a period of time, it is important to know that today's call includes time-sensitive information that maybe accurate only as of today's date, October 27, 2010.

Our call will begin with remarks by Bruce Duncan, our President and CEO; to be followed by Scott Musil, our Acting Chief Financial Officer, who will discuss our results, our capital position, and guidance; after which we will be pleased to open it up for your questions. Also in attendance today are Jojo Yap, our Chief Investment Officer; Chris Schneider, Senior Vice President of Operations; and, Bob Walter, Senior Vice President of Capital Markets.

Now I'd like to turn the call over to Bruce.

Bruce Duncan

Thanks, Art. And thank you all very much for joining us on our call today. As you saw on our press release last night, we have some good news to report. With respect to our portfolio, our team continues to do a very good job of leasing as we improved occupancy again this quarter by 150 basis points to 83.6%. And as you saw on our announcement on Monday, we are also pleased to announce that we were successful in amending the terms of our credit facility. We view this amendment as a game changing event for our company in terms of our long-term strategy, including our execution plan for the next two years.

The amended line gives us covenant relief such that we now have cushion on all covenant ratios and also removes economic gains and losses from the calculation of the fixed charge covenant. Scott will walk you through the specifics on the amendment. We thank our bank group for their support and cooperation in reaching this agreement, which we believes benefits all of our stakeholders by setting the stage for further de-leveraging in our ability to refine our portfolio.

So as we were working towards this line agreement, we've also been hard at work over the past several quarters at reexamining our portfolio. We performed a bottom-up review of every asset, which is truly a concerted effort involving our regional teams with their local markets and property level expertise, our dispositions group and our senior management team. Through this process, we've determined a pool of assets that we view as non-strategic to our portfolio. With the covenants no longer a governor of which assets we can sell, we're going to reshape our portfolio by selectively disposing of these assets while generating funds to further reduce our debt.

Related to this non-strategic pool, we took an impairment charge totaling approximately $164 million this quarter, which reflects the change in our asset management strategy and expected holdings period for these assets. The total book value of this pool is now approximately $414 million. Scott will talk more about the composition of the impairments in his remarks.

Let me characterize the properties in this pool for you, and why we view them as non-strategic relative to our long term strategy. Vacant buildings and lands that are primarily suited to user-buyers continues to be a focus. This is really a continuation of what we've been doing over the past several quarters, where we have had some very good execution in terms of pricing and portfolio impact. Also, a number of targeted markets – properties are in locations where we have limited holdings and lack economies of scale; or our assets in tertiary markets, which were, for the most part, acquired in portfolio acquisitions over the years.

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