First Industrial Realty Trust Inc. (NYSE:FR PRKCL) Q4 2016 Earnings Conference Call - Final Transcript

Feb 23, 2017 • 12:00 pm ET


First Industrial Realty Trust Inc. (NYSE:FR PRKCL) Q4 2016 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by and welcome to the First Industrial Fourth Quarter Results Conference Call.

(Operator Instructions)

It is now my pleasure to turn the call over to Art Harmon, Vice President of Investor Relations, to begin. Please go ahead, sir.

Art Harmon

Thanks, Maria. Hello everyone, and welcome to our call.

(Forward-Looking Cautionary Statements)

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

Peter Baccile

Thanks, Art. And thank you to everyone for joining us today.

2016 was another excellent year for First Industrial. We continued to execute our mission of driving cash flow growth, creating long term value, and taking care of our customers. Our talented team delivered strong results, pushing our year end portfolio occupancy to 96%, achieving gross and cash rents on new and renewal leases of 6.6%, and producing an increase in same-store NOI of 6.1% on a cash basis.

Our platform also delivered and placed in service 3.3 million square feet of state-of-the-art developments totaling $210 million and an occupancy rate of 98%. The weighted average first-year GAAP yield on those developments is 7.4%, representing strong value creation based on the healthy spread we achieved compared to prevailing market cap rates for similar buildings. As a reminder, when we say GAAP yield, that's our first year cash NOI divided by our GAAP investment basis.

During 2016, we also acquired $57 million of high-quality buildings and $54 million of land. The vast majority of that land was put into production via development. Lastly, we sold $170 million of assets as part of our ongoing portfolio management efforts. So thanks to all my teammates for a job well done in 2016. I know you share my enthusiasm for getting that job done again in 2017, and we're certainly off to a great start.

This week marked our return to the unsecured debt markets as we agreed to terms on a $200 million private placement of unsecured notes comprised of $125 million with a 10-year term and $75 million with a 12-year term. Scott will discuss this in more detail in his remarks. Because of our achievements in 2016 and our expectations for continuing cash flow growth in 2017, as well as our strong balance sheet position, the Board of Directors authorized an increase in our dividend. Per our press release, our first quarter dividend will be $0.21 per share, representing an increase of 10.5%.

With respect to our markets, strong fundamentals continue. We see healthy leasing interest from a variety of users, which puts us in a position to drive rent growth. We're also seeing more supply. But contrary to many prognostications, demand has