First Industrial Realty Trust, Inc. Q1 2010 Earnings Call Transcript

First Industrial Realty Trust, Inc. Q1 2010 Earnings Call Transcript
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First Industrial Realty Trust, Inc. (FR)

Q1 2010 Earnings Call Transcript

April 28, 2010 11:00 am ET

Executives

Art Harmon – Director, IR

Bruce Duncan – President & CEO

Scott Musil – CFO

Jojo Yap –

Chief Investment Officer

Chris Schneider – SVP, Operations and Chief Information Officer

Analysts

Ki Bin Kim – Macquarie

Steven Frankel – Green Street Advisors

Paul Adornato – BMO Capital Markets

Dan Donlan – Janney Capital Markets

Ben Mackovjak – Rivanna Capital

Stewart Henley [ph]

Presentation

Operator

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Good morning. My name is Julianne and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial first quarter results conference 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 would now like to turn the conference over to Mr. Art Harmon, Director of Investor Relations.

Mr. Harmon, please go ahead.

Art Harmon

Thanks Julianne. Hello everyone, and welcome to our call. Before we discuss our first 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 plan 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 31, 2009, filed with the SEC and subsequent reports on 10-Q. Reconciliations from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report available at firstindustrial.com under the Investor Relations tab.

Our call will begin with remarks by Bruce Duncan, our President and CEO, which should be followed by a review of our results, financial position and guidance by Scott Musil, our Acting Chief Financial Officer after which we will be pleased to open it up for your questions.

The other members of senior management 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 all very much for joining us today. Today, my comments will center on our view of our markets in terms of leasing as well as invested demand. I will also review our capital plans for the year as we continue on our mission to deliver our balance sheet, and then I'd like to update you on the status of our joint ventures.

On the leasing front, as noted last quarter we've experienced a pickup in traffic and demand and virtually all of our markets in spaces. Industrial real estate demand tends to lay GDP growth, so with projects for continued economic recovery we may be seeing above the light at the end of the tunnel.

We believe that most markets are at or close to bottoming out, and we are seeing market win stabilize, but lease negotiation still remains difficult given in the level of competing available supply in most of our markets. Give tenant many choices with the national industrial market at roughly 86% occupied.

Within our own portfolio, some of the markets we have picked some occupancy over the past two quarters include Central Pennsylvania helped by our Diapers.com lease as well as New Jersey, Ohio, Phoenix, and Los Angeles. In addition Seattle, Houston and Northern New Jersey continue to remain strong from an occupancy standpoint.

For our overall portfolio, we expect our occupancy to be relatively stable for the next two quarters and then turn upwards in the fourth quarter. We continue to aggressively pursue tenant to improve occupancy. We are using everything in our tool box, location, functionality, our reputation for great customer service, free rent and our ability to fund TI and we are trying to keep lease terms short, so we could benefit from a recovery in rent and protect the long-term prospects for our property. While our business depends on the healthy economy, we are doing what we can to control our own destiny by blocking and tackling.

Our team is doing a great job, day-in and day-out, and I thank them for their hard work. They are doing everything they can to drive occupancy such as executing our programs to make our vacancies lease ready working with our appropriate partners to find properties that meet customers' needs, making unsolicited lease offers, being creative with lease structures and finding users with temporary space needs to pick up incremental cash flow.

One positive regarding to current level of availability is that there is virtually no do supply coming online. New delivery in the United States for 2010 are expected to be below 30 million square feet, compared to 70 million square feet in 2009, and 184 million square feet in 2008. Additionally investment demand for industrial properties continues to improve as there is significant capital on the sidelines speaking as a whole.

We expect that the bid-ask spread should continue to narrow, which should ultimately results in improved sales volumes and higher pricing for sellers. Obviously, a better sales environment would be helpful for us as additionally sales are an important part of our capital management plan, which I would now discuss.

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