Fitch Ratings has affirmed the following credit ratings of First
Industrial Realty Trust, Inc. (NYSE: FR or 'the company') and its
operating partnership, First Industrial, L.P.:
First Industrial Realty Trust, Inc.
--Issuer Default Rating (IDR) at 'BBB';
--$275.0 million of preferred stock at 'BBB-';
First Industrial, L.P.
--IDR at 'BBB';
--Approximately $1.4 billion of senior unsecured notes at 'BBB';
--$200.0 million of senior unsecured exchangeable notes at 'BBB';
--$500.0 million unsecured bank credit facility at 'BBB'.
The Rating Outlook is Stable.
The rating affirmations center on FR's flexible funding profile,
geographically diverse industrial property portfolio, large pool of
unencumbered assets representing 96.1% of total real estate as of March
31, 2008, and appropriate risk-adjusted capitalization for the rating
category as of March 31, 2008. The current ratings are further supported
by the company's manageable lease expiration schedule, granular tenant
roster of 2,146 in-service tenants as of March 31, 2008, and growing
joint venture platform.
Credit concerns include the fact that the company's liquidity position
is highly dependent upon proceeds from asset sales, a more volatile cash
flow stream than rental revenue. In addition, gains on asset sales have
materially contributed to First Industrial's ability to pay its stock
dividends over the past several years and will continue to support FR's
dividends going forward.
With respect to operations, it should be noted that in the fourth
quarter of 2006, FR redefined the way in which it calculates
same-property net operating income (i.e., the same-store pool now
includes all operating properties-whether stabilized or not-and
development properties completed at least 12 months before first day of
the preceding year), and FR no longer tracks same-property net operating
income from stabilized properties only. Average same-property net
operating income growth over the four quarters ended March 31, 2008 was
5.2%.
FR's rising rental revenues and in-service property occupancy (which
increased from 94.0% as of March 31, 2007 to 94.2% as of March 31,
2008), coupled with fees and equity earnings from a growing joint
venture platform, have bolstered FR's earnings in recent quarters.
Fitch-defined recurring EBITDA fixed charge coverage (recurring EBITDA
less capital expenditures less straight-line rent adjustments, divided
by interest expense, capitalized interest and preferred dividends) was
1.1 times (x) for the twelve months ended March 31, 2008 and First
Industrial-defined fixed charge coverage (net operating income plus FFO
from joint ventures net of G&A cost of joint ventures plus economic
gains net of G&A cost of economic gains less G&A of portfolio earnings
less benefit/provision for income taxes divided by interest expense,
principal amortization and preferred dividends) was 2.8x for the twelve
months ended March 31, 2008.
Nevertheless, Fitch believes that FR's FFO payout ratios (excluding
gains on asset sales) are high for the 'BBB' rating level and that a
greater focus on earnings from core property operations instead of asset
sales would serve to strengthen FR's creditworthiness.
The Stable Outlook reflects FR's consistent operating performance in
recent quarters despite headwinds in the capital markets, and the view
that FR's stabilized property portfolio will continue to complement
earnings from joint venture activities and asset sales. Broadly, the
industrial real estate industry continues to benefit from increased
volume of containerized cargo shipments and evolving patterns of
consumer goods distribution, which bodes well for FR. Further, FR's
largely unencumbered portfolio provides support to bondholders in the
event that industrial real estate fundamentals weaken substantially.
Going forward, the following conditions would place pressure on FR's
existing ratings or Outlook:
--If Fitch-defined recurring EBITDA fixed charge coverage were to fall
to 1.0x or lower for several quarters;
--If First Industrial-defined fixed charge coverage were to fall to 2.5x
or lower for several quarters;
--If Fitch-defined total EBITDA fixed charge coverage were to fall to
2.5x or lower for several quarters;
--If the company's risk-adjusted capital ratio at a 'BBB' stress level
were to fall below 1.0x; or
--If debt divided by gross real estate investments (using FR
calculations) were to rise to 55.0% or above for several quarters.
Conversely, the current ratings or Outlook may improve if Fitch-defined
fixed charge coverage were to increase to 2.0x for several quarters and
if other credit metrics did not weaken.
Headquartered in Chicago, First Industrial is a real estate investment
trust that, as of March 31, 2008, owned 852 industrial properties
(inclusive of developments in process) located in 28 states in the
United States and one province in Canada, containing an aggregate of
approximately 74.4 million square feet of gross leaseable area
(inclusive of developments in progress). As of March 31, 2008, the
company had $3.8 billion in undepreciated book assets and $1.4 billion
in undepreciated book stockholders' equity.
Fitch's rating definitions and the terms of use of such ratings are
available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance and other relevant policies
and procedures are also available from the 'Code of Conduct' section of
this site.
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