First Industrial executives
discussed investments during
the Q3 earnings call.

CHICAGO-During First Industrial Real Estate Trust’s Q3 earnings call, executives noted that the REIT completed and committed to a total of more than $200 million of new investments. Though the local company’s goal is to buy more, president and CEO Bruce Duncan acknowledged, during the call, that it won’t be easy.

“While we’re pleased with our progress, it’s also important to note that the investment markets, particularly for the types of assets we’re focused on, remain very competitive,” he remarked. “We’ll maintain our discipline on pricing so our main avenue for growth and new investment may continue to be development or value-add acquisition opportunities using our platform.”

The acquisitions and investments made during Q3 included $52 million spent on 1.1 million square feet in Houston and Pennsylvania and $36 million for the 692,000-square-foot First Inland Logistics Center development in Southern California. Additionally, the REIT invested $115 million in developments and the following building expansions including:

  • The 489,000-square-foot First Bandini Logistics Center in Los Angeles County
  • The 300,000-square-foot First Chino Logistics Center in the West Inland Empire
  • A 156,000-square-foot building expansion in Minneapolis.

To fund this activity, First Industrial sold $56.6 million worth of assets, bringing the YTD sales total to $80.4 million. The largest sale involved a Columbus, OH portfolio, which sold for $39 million. “As we discussed in past calls, Columbus has been a difficult market for us,” Duncan explained. “We expect rent growth for that market to be below average as the supply and demand fundamentals will remain challenging there for the foreseeable future.”

Also adding to liquidity was a $117 million equity offering that took place in August. Duncan pointed out that proceeds from the offering would help three developments and building expansions launched during Q3.

During the question-and-answer sections, REIT CFO Scott Musil indicated that approximately $175 million remains in First Industrial’s non-strategic portfolio and it will take about two years to dispose of those remaining assets. On what has been sold between Q4 2010 and Q3 2012, the cap rate averaged 7.7%. “So that’s a rough barometer that you could use in order to forecast what the cap rates would be a on a go-forward basis,” Musil remarked. Approximately nine million square feet remain in the non-core portfolio pool.

Analysts were also intrigued with the idea of development; one question focused on where potential development might take place. Duncan responded that sites in Pennsylvania, Dallas and Nashville could be utilized. However, “our view on development is there is a risk associated with it,” he explained. “That’s why when we did this $115 million of new development, we went out and did an equity raise to fund that. And we think it best to judge on how we do in terms of building these projects and leasing them up, as we did with First Inland Logistics.”