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CHICAGO-Diversification is paying off for First Industrial Realty Trust, Inc., which registered a 29.3% increase in earnings per share in the second quarter despite experiencing softness in two of its 25 major markets–here and Atlanta. The company also wrote off its only technology investment, a $660,000 expense that would have increased earnings to $0.77 per share rather than $0.75.

“Despite a challenging economic environment, First Industrial turned in an impressive quarter,” says president and CEO Michael W. Brennan.

Chicago was First Industrial’s third-weakest market in terms of first-half rental rate increases, with its local portfolio’s rents decreasing by 1.6%, while the vacancy rate stood at 9.4%. Atlanta (-4.2%, 8.9% vacancy) and Salt Lake City (-3%, 8.8% vacancy) turned in weaker performances in the first half of the year, reports executive vice president of operations David Draft. Rent increases of 29.1% and 21.4% were posted in the REIT’s Southern New Jersey and Northern New Jersey markets, where vacancy was less than 5%.

“They haven’t performed to the level we’d like,” says Brennan, adding he expects the portfolio’s results in Chicago and Atlanta to improve.

“The space where we’ve experienced negative rental rate growth is really over,” he says, explaining much of the space that has rolled over is less desirable. The REIT’s current availability is “a different product type, and stronger facility category.”

First Industrial now has $450 million in its Integrated Industrial Solutions pipeline, the REIT’s program that provides services related to development, existing buildings and land to corporate clients. While the REIT has put the brakes on all speculative construction, First Industrial has $289 million in developments under construction.

“I’m even more bullish about our IIS earnings,” Brennan says.

First Industrial sold 42 properties for $165.5 million, and at a 9.4% capitalization rate, in the second quarter while spending $41.6 million on new properties, buying in at a 10.5% cap rate. “The industry outlook to sell real estate remains very positive,” says chief investment office Johannson L. Yap. “For now, we remain very cautious and our underwriting will remain very conservative.”

“In our opinion, the industrial real estate fundamentals continue to make our sector attractive,” Brennan says.

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