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First Industrial Realty Trust Inc. (



Q4 2010 Earnings Conference Call

February 24, 2011, 11:00 am ET


Art Harmon – Senior Director IR

Bruce Duncan – President, CEO

Scott Musil – CFO

Jojo Yap – CIO

Chris Schneider – SVP Operations

Bob Walter – SVP Capital Markets


Ki Bin Kim – Macquarie

Suzanne Kim – Credit Suisse

Michael Mueller – J.P. Morgan

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Good morning. My name is Jody and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial Realty Trust Fourth quarter and Full Year 2010 Earnings 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 Mr. Art Harmon, Senior Director of Investor Relations. Sir, please go ahead.

Art Harmon

Thank you, Jody. Hello, everyone, and welcome to our call. Before we discuss our Fourth Quarter and Full Year 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 ‘34 Act reports.

Reconciliation from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report available at 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, February 24, 2011.

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 2011 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, let me turn the call over to Bruce.

Bruce Duncan

Thanks, Art and thank you everyone for joining us on our call today. As you saw in our press release last night, with the benefit of the improving economy and stabilizing industrial fundamentals, our team delivered a 140 basis points increase in occupancy in the fourth quarter, growing our portfolio occupancy to 85%. This was our third consecutive quarter gain. During this three quarter period, we improved occupancy by 360 basis points.

Demand was broad-base as tenants to continue to actively seek industrial space. With a number looking to expand for growth while others are reconfiguring supply chains we gain efficiency. New demand is coming from businesses of all sizes and across all property types.

Active industries include 3PL serving the needs of a range of customers. Consumer products and food related companies as well as the aerospace, medical equipments, another specialty manufacturers.

As a point of comparison for you on occupancy, the overall national industrial market improved 30 basis points to 85.7% at the end of the fourth quarter according to CB Richard Ellis - Econometric Advisors after growing just 10 basis points in the third quarter, following 11 quarters of occupancy declines.

So we have outpaced the broader market with our recent occupancy gain but we still have work to do in our portfolio, which we view as an excellent opportunity to drive cash flow and value.

We expect first quarter occupancy to be down slightly versus our year end figure, which is fairly typical for us and our peers. We forecast occupancy to improve throughout the year with our average occupancy for 2011 expected to be in the range of 85% to 87%.

One piece of good news, we received this week with the major lease expansion with one of our largest tenants. exercised their option for 468,000 square feet, and beginning in the second quarter will fully occupy our 1.3 million square foot distribution facility at Central Pennsylvania.

Rents have stabilized in most of our markets, but recall, the industrial leases are typically around five years. So as an industry, we are coming off transactions primarily signed in much better times in 2005 and 2006. As a result, we expect to rent roll downs of roughly 10% to 12% this year.

As the overall market continues to get better and drive our activity higher and stabilize our portfolio, we would expect rates on new and renewal leases to improve. In our negotiations we are striving to minimize rent declines and reduce incentives like free rent. But at this point in time, we still have vacancy to lease and customers have alternatives, so we need to be competitive on pricing and incentives.

We continue to aim to keep lease terms shorter in order to preserve the value and long term NOI growth potential of our assets. Our average lease term for our long-term leases that commenced in 2010 that is our leases with terms greater than one year was 4.3 years, compared to our overall portfolio average of six years. If you include short-term leases those less than one year, the average term for 2010 was 3.6 years.

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